Who Is (More) Rational?

Syngjoo Choi, Shachar Kariv, Wieland M?ller and Dan Silverman

American Economic Review, 2014, vol. 104, issue 6, 1518-50

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.

JEL-codes: D12 D14 D81 D83 D91 G11 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.6.1518
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Citations: View citations in EconPapers (143)

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Related works:
Working Paper: Who Is (More) Rational? (2011)
Working Paper: Who Is (More) Rational? (2011)
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