Who is (more) rational?

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

Research output: Contribution to journalArticleScientificpeer-review

55 Citations (Scopus)

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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    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