Does Market Experience Promote Rational Choice? Experimental Evidence from Rural Ethiopia

Francesco Cecchi and Erwin Bulte

Economic Development and Cultural Change, 2013, vol. 61, issue 2, 407 - 429

Abstract: We organize a field experiment with sesame farmers and brokers in northern Ethiopia to explore whether market experience fosters rational behavior--proxied by fewer Generalized Axiom of Revealed Preference (GARP) violations in a simple choice experiment. In the baseline study, farmers and brokers performed equally well or badly, which is consistent with qualitative evidence that the prior "trading experience" of our brokers is not obtained in a competitive setting. Following random assignment to a competitive market setting--a one-day trading session in a sesame auction--we find that treated farmers and brokers behave more rationally than their peers in the control group.

Date: 2013
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