Who Is (More) Rational?
AbstractRevealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function that the choices maximize. We conduct a large-scale field experiment that enables us to test subjects' choices for consistency with utility maximization and to combine the experimental data with a wide range of individual socioeconomic information for the subjects. There is considerable heterogeneity in subjects' consistency scores: high-income and high-education subjects display greater levels of consistency than low-income and low-education subjects, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16791.
Date of creation: Feb 2011
Date of revision:
Publication status: published as Syngjoo Choi & Shachar Kariv & Wieland M?ller & Dan Silverman, 2014. "Who Is (More) Rational?," American Economic Review, American Economic Association, vol. 104(6), pages 1518-50, June.
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Other versions of this item:
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-EXP-2011-02-26 (Experimental Economics)
- NEP-NEU-2011-02-26 (Neuroeconomics)
- NEP-UPT-2011-02-26 (Utility Models & Prospect Theory)
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by Economic Logician in Economic Logic on 2011-03-31 14:34:00
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by Robin Hanson in Overcoming Bias on 2011-06-28 17:50:30
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