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://ucrisportal.univie.ac.at/en/publications/f1b00096-71c7-418e-bca8-3331a0895a88