I derive a theoretical model of choice bracketing from two behavioral axioms in an expected utility framework. 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. In my model, 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. In addition to the theoretical contribution, I present an experiment which demonstrates the empirical testability of my model and provides preliminary evidence in support of its validity.

You can sign up for a 30-minute meeting with the speaker on Friday 11 December using this spreadsheet: docs.google.com/spreadsheets/d/1Vrk4zZ1ZHgoNeUiLxU2_zbAamcKhgNqxTGky1e51oYU/edit#gid=0. You must sign up before noon on Monday 7 December.