Who is (more) rational?

S. Choi, S. Kariv, W. Müller, D. Silverman

Research output: Contribution to journalArticleScientificpeer-review

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.
Original languageEnglish
Pages (from-to)1518-1550
JournalAmerican Economic Review
Volume104
Issue number6
DOIs
Publication statusPublished - Jun 2014

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Decision making
Utility maximization
Socio-economics
Standard deviation
Household wealth
Preference theory
Wealth
Utility function
Revealed preference
Experiment
Conditioning
Correlates
Decision quality

Cite this

Choi, S., Kariv, S., Müller, W., & Silverman, D. (2014). Who is (more) rational? American Economic Review, 104(6), 1518-1550. https://doi.org/10.1257/aer.104.6.1518
Choi, S. ; Kariv, S. ; Müller, W. ; Silverman, D. / Who is (more) rational?. In: American Economic Review. 2014 ; Vol. 104, No. 6. pp. 1518-1550.
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Choi, S, Kariv, S, Müller, W & Silverman, D 2014, 'Who is (more) rational?', American Economic Review, vol. 104, no. 6, pp. 1518-1550. https://doi.org/10.1257/aer.104.6.1518

Who is (more) rational? / Choi, S.; Kariv, S.; Müller, W.; Silverman, D.

In: American Economic Review, Vol. 104, No. 6, 06.2014, p. 1518-1550.

Research output: Contribution to journalArticleScientificpeer-review

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