Reference-dependent choice bracketing

Last registered on September 10, 2020
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Pre-Trial

Trial Information

General Information

Title
Reference-dependent choice bracketing
RCT ID
AEARCTR-0006419
Initial registration date
September 10, 2020

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
September 10, 2020, 10:10 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Germany
Region
Berlin

Primary Investigator

Name
Pauline Vorjohann
Affiliation
HU Berlin
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2020-09-15
End date
2020-10-31
Keywords
Other
Additional Keywords
narrow bracketing
JEL code(s)
D91
Secondary IDs
Abstract
I derive a simple and generally applicable theoretical model of choice bracketing from two behavioral axioms on top of expected utility. The first behavioral axiom establishes a direct link between narrow bracketing and correlation neglect. The second behavioral axiom identifies the reference point as the place where broad and narrow preferences are connected. The narrow bracketer is characterized by an inability to process changes from the reference point in different dimensions simultaneously. As a result, her trade-offs between dimensions are distorted. While she disregards interactions between actual outcomes, she appreciates these interactions mistakenly with respect to the reference point. Since the narrow bracketer’s ability to think multidimensionally is preserved at the reference point, my model resolves the general incompatibility of narrow bracketing and budget balance. Furthermore, it allows me to isolate the effects of narrow bracketing in the absence of loss-aversion. Finally, the model reveals a connection between narrow bracketing and the use of budgeting heuristics. In addition to the theoretical contribution, I present the results of an experiment to test the predictions and underlying assumptions of my model.
External Link(s)

Registration Citation

Citation
Vorjohann, Pauline. 2020. "Reference-dependent choice bracketing." AEA RCT Registry. September 10. https://doi.org/10.1257/rct.6419-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
I compare behavior in equivalent decision problems within subject across two treatments. One treatment (broad treatment) presents the attributes of outcomes jointly while the other treatment (narrow treatment) presents the attributes of outcomes separately.
Intervention Start Date
2020-09-15
Intervention End Date
2020-09-18

Primary Outcomes

Primary Outcomes (end points)
Willingness to pay (WTP) for portfolios
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
I conduct an online laboratory experiment. In the experiment I elicit willingness to pay (WTP) for portfolios via choice lists. Portfolios consist of two assets, a blue asset and an orange asset. Depending on the outcome of a coin toss by the computer the blue and orange asset yield blue and orange point earnings respectively. I compare WTP for equivalent portfolios within subject across two treatments. In one treatment (broad treatment) the blue and orange asset of the portfolio are presented jointly while in the other treatment (narrow treatment) participants can view the blue and orange asset of the portfolio only separately.
Experimental Design Details
Portfolios consist of two assets, a blue asset and an orange asset. Depending on the outcome of a coin toss by the computer the blue and orange asset yield blue and orange point earnings respectively. Point earnings are translated into payments via a payment rule. The payment rule is submodular, i.e. the more more blue points are earned, the less valuable is an increase in orange points and vice versa.

The experiment has 20 rounds. In the beginning of each round participants tentatively receive a simple portfolio called base-portfolio which remains constant over the course of the experiment. The base-portfolio yields the same number of blue and red points irrespective of the outcome of the coin toss.

Participants can click on a button to switch from viewing the tentatively allocated base-portfolio to viewing another portfolio called trade-portfolio. For this trade-portfolio they are asked to fill out a choice list. In every row of the choice list they have to make a decision between the given trade-portfolio and an increasing certain payment.

For each round a random draw at the end of the experiment determines whether the round is a base-round or a trade-round. In base-rounds participants are paid according to their base-portfolio. In trade-rounds the computer randomly selects one of the rows of the submitted choice list and participants are paid according to their decision in the selected row.

There are 10 different trade-portfolios and each participant fills out a choice list for each trade-portfolio in two treatments. In the first treatment (broad treatment) the participant can view the orange and blue asset of the trade-portfolio simultaneously. In the second treatment (narrow treatment) the participant can view the orange and blue asset in the trade-portfolio only separately while the view of the respective other asset is kept fixed at the respective asset in the base-portfolio. The participant can switch between viewing the blue and orange asset of the trade-portfolio by clicking on a button. The order in which participants view the different trade-portfolios in the two treatments is randomized.



Randomization Method
Computer
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
200 Individuals
Sample size: planned number of observations
200 Individuals
Sample size (or number of clusters) by treatment arms
200 Individuals per treatment arm (within-subject design)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
See the pre-analysis plan.
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

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Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials