Who is (more) rational?

Syngjoo Choi, Shachar Kariv, Wieland Müller, Daniel Silverman

Research output: Contribution to journalArticle

46 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 (US)
Pages (from-to)1518-1550
Number of pages33
JournalAmerican Economic Review
Volume104
Issue number6
DOIs
StatePublished - 2014

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

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Who is (more) rational? / Choi, Syngjoo; Kariv, Shachar; Müller, Wieland; Silverman, Daniel.

In: American Economic Review, Vol. 104, No. 6, 2014, p. 1518-1550.

Research output: Contribution to journalArticle

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
Choi, Syngjoo ; Kariv, Shachar ; Müller, Wieland ; Silverman, Daniel. / Who is (more) rational?. In: American Economic Review. 2014 ; Vol. 104, No. 6. pp. 1518-1550.
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