Economic rationality under cognitive load

Andreas Drichoutis and Rodolfo Nayga

No 2017-2, Working Papers from Agricultural University of Athens, Department Of Agricultural Economics

Abstract: Economic analysis assumes that consumer behavior can be rationalized by a utility function. Previous research has shown that some decision-making quality can be captured by permanent cognitive ability but has not examined how a temporary load in subjects' working memory can a ect economic rationality. In a controlled laboratory experiment, we exogenously vary cognitive load by asking subjects to memorize a number while they undertake an induced budget allocation task (Choi et al., 2007a,b). Using a number of manipulation checks, we verify that cognitive load has adverse a ects on subjects' performance in reasoning tasks. However, we nd no e ect in any of the goodness-of- t measures that measure consistency of subjects' choices with the Generalized Axiom of Revealed Preferences (GARP), despite having a sample size large enough to detect even small di erences between treatments with 80% power. Our nding suggests that researchers need not worry about economic rationality breaking down when subjects are placed under temporary working memory load.

Keywords: Cognitive load; rationality; revealed preferences; working memory; response times; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D11 D12 G11 (search for similar items in EconPapers)
Pages: 44
Date: 2017
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-neu and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Economic Rationality under Cognitive Load (2020)
Working Paper: Economic rationality under cognitive load (2017)
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