On 19th December 2016 (1-2pm) Uwe Sunde, Professor at the Department of Economics at the Ludwig-Maximilians-University Munich, will give a presentation about “Coping with Complexity - Experimental Evidence for Narrow Bracketing in Multi-Stage Contests" in Q4.245. Afterwards, Mr. Sunde will be available for questions and discussions. His presentation is part of https://wiwi.uni-paderborn.de/dep1/me/research/discussing-research/seam/.
This paper investigates whether decision makers bracket their choices narrowly to facilitate complex decision problems. Evidence from a framing variation of rewards in experimental two-stage pairwise elimination contests indicates that decision makers neglect the option value of participation in future stages of the contest if the reward frame facilitates the separate consideration of stages, but not if the reward frame induces forward-looking behavior. Decision makers account for the option value of participation in future stages of the contest independent of the reward frame, however, when complex strategic interactions in future stages of the contest are replaced by simple lotteries that facilitate the determination of the option value. The results present novel evidence for the prevalence and the determinants of choice bracketing as a means to cope with complexity.