Who Is (More) Rational?

Syngjoo Choi, Shachar Kariv, Wieland Müller and Dan Silverman

No 16791, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function that the choices maximize. We conduct a large-scale field experiment that enables us to test subjects' choices for consistency with utility maximization and to combine the experimental data with a wide range of individual socioeconomic information for the subjects. There is considerable heterogeneity in subjects' consistency scores: high-income and high-education subjects display greater levels of consistency than low-income and low-education subjects, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists.

JEL-codes: C93 D01 D03 D12 D81 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-exp, nep-neu and nep-upt
Note: PE
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Citations: View citations in EconPapers (24)

Published as Syngjoo Choi & Shachar Kariv & Wieland M?ller & Dan Silverman, 2014. "Who Is (More) Rational?," American Economic Review, American Economic Association, vol. 104(6), pages 1518-50, June.

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Journal Article: Who Is (More) Rational? (2014)
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