Who is (More) Rational?

48 Pages Posted: 28 Feb 2011 Last revised: 5 Mar 2011

See all articles by Syngjoo Choi

Syngjoo Choi

University College London

Shachar Kariv

University of California, Berkeley - Department of Economics

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER

Dan Silverman

University of Michigan at Ann Arbor - Economics Department; National Bureau of Economic Research (NBER)

Date Written: February 2011

Abstract

Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function that the choices maximize. We conduct a large-scale field experiment that enables us to test subjects' choices for consistency with utility maximization and to combine the experimental data with a wide range of individual socioeconomic information for the subjects. There is considerable heterogeneity in subjects' consistency scores: high-income and high-education subjects display greater levels of consistency than low-income and low-education subjects, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists.

Suggested Citation

Choi, Syngjoo and Kariv, Shachar and Müller, Wieland and Silverman, Dan, Who is (More) Rational? (February 2011). NBER Working Paper No. w16791. Available at SSRN: https://ssrn.com/abstract=1768549

Syngjoo Choi (Contact Author)

University College London ( email )

Department of Economics
Gower Street
London WC1E 6BT
United Kingdom

HOME PAGE: http://www.homepages.ucl.ac.uk/~uctpsc0/

Shachar Kariv

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

Wieland Müller

University of Vienna, Department of Economics & VCEE ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

HOME PAGE: http://https://homepage.univie.ac.at/wieland.mueller/

Tilburg University, Department of Economics & CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/w.mueller-3.htm

Dan Silverman

University of Michigan at Ann Arbor - Economics Department ( email )

701 Tappan Street
Ann Arbor, MI 48109
United States
734-764-2447 (Phone)
734-764-2769 (Fax)

HOME PAGE: http://www.econ.lsa.umich.edu/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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