Centre for Experimental Economics
How does the frame of menus influence choices in two-stage decision problems?
Lihui Lin and John Hey
Abstract
This paper experimentally investigates several theories of decision-making in a two-stage context – one in which the decision-maker (henceforth DM) must first choose a menu from a set of menus, and secondly must choose an item from the chosen menu. While standard decision theory analyses this problem using backward induction (and assuming stable preferences), several new theories postulate that the DM might anticipate that his/her preferences may change, and that the DM might well take this into account when deciding which menu to choose. Leading amongst such new theories is self-control theory, which incorporates the notion that the DM might anticipate temptation at the second stage, and hence might exercise self-control at the first stage to avoid being tempted. The other theories suggest that the DM might prefer flexibility at the second stage, and this may affect the choice at the first stage. This suggests that the composition, and particularly the frames of the choices and menus presented to the DM, may affect choice of menu. Our experimental results show that this is indeed the case.
Keywords: two-stage decision problems, choosing a menu, choosing from the menu, commitment, temptation, self-control, changing preferences
Department of Economics, University of York, Heslington, York, YO10 5DD.
Lin: ll1654@york.ac.uk; Hey: John.hey@york.ac.uk
Acknowledgements: We are grateful to the Leverhulme Trust for generously funding this research with Leverhulme Emeritus Grant EM-2019-026/7
This is the paper (PDF 
, 602kb).
This is the Supplementary material (PDF , 981kb)