Choice Bracketing
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Choice bracketing refers to the number or range of choices considered when making any individual choice. For instance, if someone is making a potentially risky choice, they may think about the potential consequences locally, or they may think about what it means to form a portfolio by combining the option they choose (and its possible consequences) with other options they will choose, have chosen, or are currently choosing. The extent to which choices are combined is the level of bracketing. Broad bracketing is when many choices are considered simultaneously, and narrow bracketing is when only a few are considered. There is much evidence that people bracket narrowly as a default, so that when there are meaningful interdependencies between choices, they can make suboptimal choices. As Friedman and Sakovics [1] put it, "consumers sometimes treat non-separable subproblems as if they were separable." The term choice bracketing was originally developed by Daniel Read and George Loewenstein in two papers [2]. Many earlier researchers have described similar concepts under different names, notably Richard Thaler [3].
Choice bracketing has proved to be a highly generative concept and is often an underlying and implicit assumption in many theoretical analyses. Considerable experimental and empirical research suggests that narrow bracketing is the norm in human behavior.
Example[edit]
Perhaps the most famous illustration is Amos Tversky and Daniel Kahneman’s (1981) simultaneous gamble choice experiment. They asked participants the following questions (with the proportions choosing each option in parentheses):
Imagine that you face the following pair of concurrent choices. First, examine both, then indicate the options you prefer.
Choice (i). Choose between:
A. A sure gain of $240 [84%]
B. 25% chance to gain $1000, and 75% chance to gain nothing [16%]
Choice (ii). Choose between:
C. A sure loss of $750 [13%]
D. 75% chance to lose $1000, and 25% chance to lose nothing [87%].
Participants were risk averse in Choice (i) and so took A, and risk seeking in Choice (ii) and so took D. Yet the combined choice of B and C is stochastically dominant over the combined choice of A and D. B and C combined give a 25% chance to gain $250 and a 75% chance to lose $750; A and D combined givea 25% chance to gain $240 and a 75% chance to lose $760. This study has been replicated many times, including an incentivised study by Matthew Rabin and Georg Weizsäcker [4] (2009). Narrow bracketing, generally used to denote one choice at a time rather than combining them, has been the majority observation in most studies that attempt to estimate the degree of narrow versus broad bracketing. Ellis and Freeman[5] report that “…74% of subjects are best described by narrow bracketing, 13% by broad bracketing, and 6% by intermediate cases.”
Narrow bracketing can be classified as a bias because it will miss configurations or interactions that emerge when multiple choices are combined: In theory, broad bracketing is always best. In the gamble example, for example, the dominance relationship cannot be perceived under narrow bracketing. In financial decisions, a well-diversified portfolio can only be achieved by thinking of all investment decisions simultaneously[6]. In negotiation, narrow bracketing can inhibit one perceiving integrative opportunities, which only arise when multiple opportunities are considered simultaneously[7].
While most studies report that narrow bracketing outperforms broad bracketing, in particular when broad bracketing elicits consideration of irrelevant factors. For instance, people seek to diversify consumption and even gambles under broad bracketing, when that diversification leads to reduced enjoyment or earnings (Read and Loewenstein, 1995; Read et al., 2001). The same desire for diversification under broad bracketing, however, has also been associated with improved diversity in organisation’s hiring practices (Chang et al., 2020).
References[edit]
- ↑ Friedman, D., & Sákovics, J. (2015). Tractable consumer choice. Theory and Decision, 79(2), 333-358.
- ↑ Read, D., Loewenstein, G., & Rabin, M. (1999). Choice Bracketing. Journal of Risk and Uncertainty, 19(1-3), 171-197. Read, D., & Loewenstein, G. (1995). Diversification bias: Explaining the discrepancy in variety seeking between combined and separated choices. Journal of Experimental Psychology: Applied, 1(1), 34.
- ↑ Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral decision making, 12(3), 183-206.
- ↑ Rabin, M. & Weiszacker, G. 2009. Narrow bracketing and dominated choices. American Economic Review, 99, 1508-1543.
- ↑ Ellis, A., & Freeman, D. J. (2020). Revealing choice bracketing. arXiv preprint arXiv:2006.14869.
- ↑ Choi, J. J., Laibson, D. & Madrian, B. C. 2009. Mental accounting in portfolio choice: Evidence from a flypaper effect. American Economic Review, 99, 2085-2095.
- ↑ Read, D. et al., M.(1999). Choice bracketing; Freund, P. A., & Trötschel, R. (2023). Expanding the pie or spoiling the cake? How the number of negotiation issues affects integrative bargaining. Journal of Applied Psychology.
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