Who is (more) rational?

Author(s)
Syngjoo Choi, Kariv Shachar, 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 the choices maximize. We conduct a large-scale experiment to test for consistency with utility maximization. Consistency scores vary markedly within and across socioeconomic groups. In particular, consistency is strongly related to wealth: A standard deviation increase in consistency is associated with 15-19 percent more household wealth. This association is quantitatively robust to conditioning on correlates of unobserved constraints, preferences, and beliefs. Consistency with utility maximization under laboratory conditions thus captures decision-making ability that applies across domains and influences important real-world outcomes.

Organisation(s)
Department of Economics, Vienna Center for Experimental Economics
External organisation(s)
University College London, University of California, Berkeley, University of Michigan
Journal
The American Economic Review (Print Edition)
Volume
104
Pages
1518-1550
No. of pages
33
ISSN
0002-8282
DOI
https://doi.org/10.1257/aer.104.6.1518
Publication date
06-2014
Peer reviewed
Yes
Austrian Fields of Science 2012
502047 Economic theory
ASJC Scopus subject areas
Economics and Econometrics
Portal url
https://ucris.univie.ac.at/portal/en/publications/who-is-more-rational(f1b00096-71c7-418e-bca8-3331a0895a88).html