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Who Is (More) Rational?

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  • Syngjoo Choi
  • Shachar Kariv
  • Wieland Müller
  • Dan Silverman

Abstract

Revealed 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 Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16791.

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Date of creation: Feb 2011
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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.
Handle: RePEc:nbr:nberwo:16791

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  1. Casper Ewijk & Bas Jacobs & Ruud Mooij, 2007. "Welfare Effects of Fiscal Subsidies on Home Ownership in the Netherlands," De Economist, Springer, vol. 155(3), pages 323-336, September.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Who is rational?
    by Economic Logician in Economic Logic on 2011-03-31 14:34:00
  2. Who Is Consistent?
    by Robin Hanson in Overcoming Bias on 2011-06-28 17:50:30
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Cited by:
  1. Santiago Sanchez-Pages (University of Edinburgh) & Marco Faravelli (School of Economics, University of Queensland, Australia), 2012. "(Don't) Make My Vote Count," ESE Discussion Papers 213, Edinburgh School of Economics, University of Edinburgh.
  2. József Sákovics (University of Edinburgh), 2012. "Revealed cardinal preference," ESE Discussion Papers 212, Edinburgh School of Economics, University of Edinburgh.
  3. Vieider, Ferdinand M. & Lefebvre, Mathieu & Bouchouicha, Ranoua & Chmura, Thorsten & Hakimov, Rustamdjan & Krawczyk, Michal & Martinsson, Peter, 2013. "Common components of risk and uncertainty attitudes across contexts and domains: Evidence from 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2013-402, Social Science Research Center Berlin (WZB).
  4. Apesteguia, Jose & Ballester, Miguel A., 2013. "Choice by sequential procedures," Games and Economic Behavior, Elsevier, vol. 77(1), pages 90-99.
  5. Vieider, Ferdinand M. & Truong, Nghi & Martinsson, Peter & Pham Khanh Nam & Martinsson, Peter, 2013. "Risk preferences and development revisited: A field experiment in Vietnam," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2013-403, Social Science Research Center Berlin (WZB).
  6. Johannes Spinnewijn, 2012. "Heterogeneity, Demand for Insurance and Adverse Selection," CEP Discussion Papers dp1142, Centre for Economic Performance, LSE.
  7. Halevy, Yoram, 2012. "Parametric Recoverability of Preferences," Microeconomics.ca working papers yoram_halevy-2012-20, Vancouver School of Economics, revised 07 Apr 2014.
  8. Ariel Rubenstein, 2013. "Response time and decision making: An experimental study," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(5), pages 540-551, September.
  9. Hans-Martin Gaudecker & Arthur Soest & Erik Wengström, 2012. "Experts in experiments," Journal of Risk and Uncertainty, Springer, vol. 45(2), pages 159-190, October.
  10. Raymond Fisman & Pamela Jakiela & Shachar Kariv, 2014. "The Distributional Preferences of Americans," NBER Working Papers 20145, National Bureau of Economic Research, Inc.
  11. Mark Dean & Daniel Martin, 2011. "Testing for Rationality with Consumption Data: Demographics and Heterogeneity," Working Papers 2011-11, Brown University, Department of Economics.
  12. Yang, Xiaojun & Carlsson, Fredrik, 2012. "Intra-household decisions making on intertemporal choices: An experimental study in rural China," Working Papers in Economics 537, University of Gothenburg, Department of Economics.
  13. Cappelen, Alexander W. & Kariv, Shachar & Sørensen, Erik Ø. & Tungodden, Bertil, 2014. "Is There a Development Gap in Rationality?," Discussion Paper Series in Economics 8/2014, Department of Economics, Norwegian School of Economics.
  14. Andrew Leicester & Peter Levell, 2013. "Anti-smoking policies and smoker well-being: evidence from Britain," IFS Working Papers W13/13, Institute for Fiscal Studies.
  15. Jakiela, Pamela & Ozier, Owen, 2012. "Does Africa need a rotten Kin Theorem ? experimental evidence from village economies," Policy Research Working Paper Series 6085, The World Bank.

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