Abstract
Although households are responsible for many important decisions, they have rarely been the subject of economics experiments. We conduct a series of linked and incentivized experiments on decision-making, designed to see if the anomalies typically found in individual choice experiments are found when the subjects are couples from long-term relationships. Specifically we investigate the endowment effect, the compromise effect, asymmetric dominance and the ‘more is less’ phenomena. Comparing the results with two control groups (students and non-student individuals) we find broadly the same pattern of anomalies in individuals as we do in couples. Thus behavioural patterns that appear in individual choices appear relevant for decisions made by established couples.
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Notes
For instance, the endowment effect (Knetsch and Sinden 1984) is usually interpreted as evidence against the rational choice model. However, in the context of two people bargaining, to avoid protracted disputes players might use the status quo as the default choice if no Pareto improvement upon it is possible. It is hard to label ‘irrational’ an endowment effect caused by such a bargaining rule.
There is a longer, but intermittent tradition of un-incentivized experiments on couples within marketing science (e.g. Corfman and Lehmann 1987).
Mince pies—a Christmas food in the UK—contain (minced) candied fruit rather than meat.
There is a further need for caution here, because in principle, anomalies in individuals and couples could be driven by different processes. E.g. the compromise effect might indeed be a cognitive error in individuals, but a result of bargaining protocols in couples.
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The work reported here was financed by the UK’s ESRC, grant no. RES-000-22-2081.
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Munro, A., Popov, D. A portmanteau experiment on the relevance of individual decision anomalies for households. Exp Econ 16, 335–348 (2013). https://doi.org/10.1007/s10683-012-9340-x
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DOI: https://doi.org/10.1007/s10683-012-9340-x
Keywords
- Household choice
- Experiment
- Couples
- Family
- Anomalies
- Endowment effect
- Compromise effect
- Asymmetric dominance
- ‘More is less’