Discussion paper

DP7414 Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects

This paper proposes a model of boundedly rational choice that explains the well known attraction and compromise effects. Choices in our model are interpreted as a cooperative solution to a bargaining problem among an individual?s conflicting dual selves. We axiomatically characterize a unique bargaining solution that captures both effects when the selves? preferences are known. We then provide a revealed preference foundation to our solution, and characterize the extent to which these two underlying preference relations can be uniquely identified.

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Citation

Eliaz, K and G de Clippel (2009), ‘DP7414 Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects‘, CEPR Discussion Paper No. 7414. CEPR Press, Paris & London. https://cepr.org/publications/dp7414