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  5. Revealing Choice Bracketing

Revealing Choice Bracketing

  • Andrew Ellis
  • David J. Freeman
American Economic Review (Forthcoming)

Abstract

Experiments suggest that people fail to take into account interdependencies between their choices—they do not broadly bracket. Researchers often instead assume that people narrowly bracket, but existing designs do not test it. We design a novel experiment and revealed preference tests for how someone brackets their choices. In portfolio allocation under risk, social allocation, and induced-value shopping experiments, 40–43% of subjects are consistent with narrow bracketing and 0–16% with broad bracketing. Adjusting for each model’s predictive precision, 74% of subjects are best described by narrow bracketing, 13% by broad bracketing, and 6% by intermediate cases.

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