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The Compromise Effect Is Reversed When Choice Seems Like a Loss

18 October 2018 at 11:30 AM - 1:00 PM

Room 205b, Campus on Viale Romania, 32

Speaker: Baler Bilgin, Koç University

Abstract:

"We extend the typical compromise effect scenario by introducing an option external to the compromise choice set that is not available for choice but can act as a reference point during choice (e.g., current endowment). We examine how such external options affect the likelihood of compromising by framing choice from the compromise set as a gain or a loss. We find that the same choice set produces a compromise effect when choice is framed as a gain and its reversal when it is framed as a loss. We present evidence supporting reference-dependent diminishing sensitivity and rule out polarization as an alternative account. The reversal depends on the capacity of an external option to act as a reference point and frame choice as a gain or loss. Because trading off attributes involves reference points internal to the set, a context that favors local attribute trade-offs eliminates the reversal."