Bounding the Impact of Market Experience on Rationality: Evidence from a Field Experiment with Imperfect Compliance
AbstractWhile laboratory experiments documenting some level of irrational behavior are now commonplace, explorations into whether such irrationalities exist in the field are rare. Equally as scarce are studies that explore the influence of market experience on the level and evolution of irrationality. Using field data gathered from more than 380 subjects of age 6-18, we investigate these issues using Generalized Axiom of Revealed Preference experiments. To circumvent the endogeneity of market experience, we exogenously induce such experience through the design of a field experiment. Compliance with the experiment was not perfect, however. We are, nevertheless, able to bound the average treatment effect using the sharp bounds derived in Balke and Pearl [Journal of the American Economic Association, 1997, 92, 1171-1776]. Empirical results indicate that deviations from rational behavior exist in the field, but that market experience is a significant contributor to the development of rational choice.Length: 20 pages
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Bibliographic InfoPaper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0505.
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Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Web page: http://www.smu.edu/economics
rationality; market learning; field experiment; imperfect compliance; treatment effects; nonparametric bounds; instrumental variables; intent-to-treatCreation-Date: 2005-10;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-15 (All new papers)
- NEP-CBE-2005-10-15 (Cognitive & Behavioural Economics)
- NEP-EVO-2005-10-15 (Evolutionary Economics)
- NEP-EXP-2005-10-15 (Experimental Economics)
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