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Random behavior and the as-if defense of rational choice theory in demand experiments

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  • Moscati, Ivan
  • Tubaro, Paola

Abstract

Rational choice theory (RCT) models decision makers as utility maximizers and is often defended via an as-if argument. According to this argument, although real individuals do not consciously maximize their utility function, their choices can be explained as if they were generated by utility maximization. An alternative model is random-choice, which assumes that decision makers pick up an element from a given set according to a uniform distribution on the set. In this paper we examine a series of experiments that compare RCT and the random-choice model as alternative explanations of consumer demand, and investigate how these experiments contribute to clarifying the actual scope of RCT and the shortcomings of the standard as-if defense of it.

Suggested Citation

  • Moscati, Ivan & Tubaro, Paola, 2009. "Random behavior and the as-if defense of rational choice theory in demand experiments," LSE Research Online Documents on Economics 27001, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:27001
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    References listed on IDEAS

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    5. Paola Tubaro, 2009. "Is individual rationality essential to market price formation? The contribution of zero-intelligence agent trading models," Journal of Economic Methodology, Taylor & Francis Journals, vol. 16(1), pages 1-19.
    6. Moscati, Ivan, 2006. "Epistemic virtues and theory choice in economics," LSE Research Online Documents on Economics 58429, London School of Economics and Political Science, LSE Library.
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    13. Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, vol. 107(444), pages 1431-1444, September.
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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