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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, 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 Consistent?
    by Robin Hanson in Overcoming Bias on 2011-06-28 17:50:30
  2. Who is rational?
    by Economic Logician in Economic Logic on 2011-03-31 14:34:00
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Cited by:
  1. Jose Apesteguia & Miguel Ballester, 2009. "Choice by Sequential Procedures," NajEcon Working Paper Reviews, www.najecon.org 814577000000000404, www.najecon.org.
  2. Faravelli, Marco & Sanchez-Pages, Santiago, 2012. "(Don’t) Make My Vote Count," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2012-07, Scottish Institute for Research in Economics (SIRE).
  3. 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, Social Science Research Center Berlin (WZB) SP II 2013-403, Social Science Research Center Berlin (WZB).
  4. Halevy, Yoram & Persitz, Dotan & Zrill, Lanny, 2012. "Parametric Recoverability of Preferences," Microeconomics.ca working papers, Vancouver School of Economics yoram_halevy-2012-20, Vancouver School of Economics, revised 16 Aug 2014.
  5. Jakiela, Pamela & Ozier, Owen, 2012. "Does Africa need a rotten Kin Theorem ? experimental evidence from village economies," Policy Research Working Paper Series, The World Bank 6085, The World Bank.
  6. Yang, Xiaojun & Carlsson, Fredrik, 2012. "Intra-household decisions making on intertemporal choices: An experimental study in rural China," Working Papers in Economics, University of Gothenburg, Department of Economics 537, University of Gothenburg, Department of Economics.
  7. József Sákovics (University of Edinburgh), 2012. "Revealed cardinal preference," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 212, Edinburgh School of Economics, University of Edinburgh.
  8. Raymond Fisman & Pamela Jakiela & Shachar Kariv, 2014. "The Distributional Preferences of Americans," NBER Working Papers 20145, National Bureau of Economic Research, Inc.
  9. 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, Social Science Research Center Berlin (WZB) SP II 2013-402, Social Science Research Center Berlin (WZB).
  10. Andrew Leicester & Peter Levell, 2013. "Anti-smoking policies and smoker well-being: evidence from Britain," IFS Working Papers, Institute for Fiscal Studies W13/13, Institute for Fiscal Studies.
  11. Melanie Lührmann & Marta Serra-Garcia & Joachim Winter, 2014. "The Impact of Financial Education on Adolescents' Intertemporal Choices," CESifo Working Paper Series 4925, CESifo Group Munich.
  12. Johannes Spinnewijn, 2012. "Heterogeneity, Demand for Insurance and Adverse Selection," CEP Discussion Papers, Centre for Economic Performance, LSE dp1142, Centre for Economic Performance, LSE.
  13. 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, Edinburgh School of Economics, University of Edinburgh 213, Edinburgh School of Economics, University of Edinburgh.
  14. Cappelen, Alexander W. & Kariv, Shachar & Sørensen, Erik Ø. & Tungodden, Bertil, 2014. "Is There a Development Gap in Rationality?," Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics 8/2014, Department of Economics, Norwegian School of Economics.
  15. Sákovics, József, 2012. "Revealed cardinal preference," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2012-02, Scottish Institute for Research in Economics (SIRE).
  16. Ariel Rubenstein, 2013. "Response time and decision making: An experimental study," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(5), pages 540-551, September.
  17. Mark Dean & Daniel Martin, 2011. "Testing for Rationality with Consumption Data: Demographics and Heterogeneity," Working Papers, Brown University, Department of Economics 2011-11, Brown University, Department of Economics.
  18. Hans-Martin Gaudecker & Arthur Soest & Erik Wengström, 2012. "Experts in experiments," Journal of Risk and Uncertainty, Springer, Springer, vol. 45(2), pages 159-190, October.

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