NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Jonathan P. Beauchamp

Department of Economics
Harvard University
Cambridge, MA 02138

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

December 2015Controlling for the Compromise Effect Debiases Estimates of Risk Preference Parameters
with Daniel J. Benjamin, Christopher F. Chabris, David I. Laibson: w21792
The compromise effect arises when options near the "middle" of a choice set are more appealing. The compromise effect poses conceptual and practical problems for economic research: by influencing choices, it distorts revealed preferences, biasing researchers' inferences about deep (i.e., domain general) preferences. We propose and estimate an econometric model that disentangles and identifies both deep preferences and the context-dependent compromise effect. We demonstrate our method using data from an experiment with 550 participants who made choices over lotteries from multiple price lists. Following prior work, we manipulate the compromise effect by varying the middle options of each multiple price list and then estimate risk preferences without modelling the compromise effect. These na...
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us