Poor and Rational: Decision-Making under Scarcity

Dietmar Fehr, Günther Fink and B. Kelsey Jack

Journal of Political Economy, 2022, vol. 130, issue 11, 2862 - 2897

Abstract: We investigate the link between poverty and decision-making in a sample of farmers in Zambia, who were given the opportunity to exchange randomly assigned household items for alternative items of similar value. Analyzing a total of 5,842 trading decisions and leveraging multiple sources of variation in financial constraints, we show that exchange asymmetries decrease in magnitude when participants are more constrained. This result is robust to experimental procedures and is not mediated by changes in cognitive performance. Consistent with the interpretation that scarcity leads to more rational decisions by increasing the utility loss from forgone trading, we show that trading probabilities go up when the market value of the items is exogenously increased.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://dx.doi.org/10.1086/720466 (application/pdf)
http://dx.doi.org/10.1086/720466 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/720466

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().