The Roommate's Dilemma: An Experimental Analysis of Choice Bracketing in Games

Abstract

A subject brackets two decisions if she choose[s] an option in each case without full regard to the other. Although in most situations such behavior is unlikely to be optimal, it is well documented in experiments where subjects make decisions in the absence of strategic considerations. This paper uses an economic experiment to investigate whether subjects also bracket their decisions in games. Subjects played two Volunteer's Dilemmas at the same time, with the payoffs from both games added to their earnings. In a lottery task, subjects were generally revealed to be risk-averse narrow bracketers. Aggregate play in the Roommate's Dilemma is not consistent with predictions made by assuming all subjects either narrowly or broadly bracket. On the individual level, structural modeling suggests that most subjects bracket narrowly in the game.