American Economic Review: Vol. 99 No. 4 (September 2009)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


AER - All Issues

AER Forthcoming Articles

Narrow Bracketing and Dominated Choices

Article Citation

Rabin, Matthew, and Georg Weizsacker. 2009. "Narrow Bracketing and Dominated Choices." American Economic Review, 99(4): 1508-43.

DOI: 10.1257/aer.99.4.1508


We show that any decision maker who "narrowly brackets" (evaluates decisions separately) and does not have constant-absolute-risk-averse preferences will make a first-order stochastically dominated combined choice in some simple pair of independent binary decisions. We also characterize the preference-contingent monetary cost from this mistake. Empirically, in a real-stakes laboratory experiment that replicates Tversky and Kahneman's (1981) experiment, 28 percent of participants choose dominated combinations. In a representative survey eliciting hypothetical large-stakes choices, higher proportions do so. Violation rates vary little with personal characteristics. Average preferences are prospect-theoretic, with an estimated 89 percent of people bracketing narrowly. (JEL D12, D81)

Article Full-Text Access

Full-text Article

Additional Materials


Rabin, Matthew (U CA, Berkeley)
Weizsacker, Georg (DIW Berlin)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
D81: Criteria for Decision-Making under Risk and Uncertainty

American Economic Review

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us