Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 10/2018: The (un)compromise effect

Mathias Ekström ()
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Mathias Ekström: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: The compromise effect—i.e., the preference for the middle option—is an established bias in behavioral economics, but has not been experimentally validated in the field. In the current study I test the compromise effect in a natural context, and whether this bias can be used to stimulate active choice—the (un)compromise effect. In a mail fund raiser for a large US hospital, I evaluate their baseline ask string [$10, $50, $100, $ ] to an extended version [$10, $50, $100, $250, $500, $ ]. In line with the compromise effect, the extended ask string increases the average amount given and the share of donors giving $100, which is now the middle option. Importantly, however, and in line with a model of contextual inference, revealing the middle option is not necessary for the effect to arise. The (un)compromise ask string [$10, $500, $ ] generates the same average amount given and same share giving $100, as the extended ask string—the only difference being that 90 percent of donors, instead of 30 percent, use the open-ask alternative. Hence, by only providing informative end points of a distribution, organizations can benefit from the compromise effect and at the same time promote individuality by stimulating active choice. I discuss theoretical and practical implications of the results.

Keywords: Compromise effect; Consumer choice; Field experiments; Charitable giving

JEL-codes: C93; D03; D64

18 pages, First version: May 8, 2018. Revised: May 16, 2018.

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