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Discussion Paper Details

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

Author(s): Geoffroy de Clippel and Kfir Eliaz

Publication Date: August 2009

Keyword(s): Attraction Effect, Bounded Rationality, Compromise Effect, Cooperative Bargaining, Fallback Bargaining and Reason-based-choice

Programme Area(s): Industrial Organization

Abstract: 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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Bibliographic Reference

de Clippel, G and Eliaz, K. 2009. 'Reason-Based Choice: A Bargaining Rationale for the Attraction and Compromise Effects'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7414