Bracketing effects on risk tolerance: Generalizability and underlying mechanisms

Abstract

AbstractResearch has shown that risk tolerance increases when multiple decisions and associated outcomes are presented together in a broader “bracket” rather than one at a time. The present studies disentangle the influence of problem bracketing (presenting multiple investment options together) from that of outcome bracketing (presenting the aggregated outcomes of multiple decisions), factors which have been deliberately confounded in previous research. In the standard version of the bracketing task, in which participants decide how much of an initial endowment to invest into each in a series of repeated, identical gambles, we find a problem bracketing effect but not an outcome bracketing effect. However, this pattern of results does not generalize to the cases of non-identical gambles nor discrete choice, where we fail to find the standard bracketing effect.