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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


"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."