Rule Rationality: Evidence from the Lab
32 Pages Posted: 29 Aug 2020
Date Written: July 23, 2020
Abstract
In this paper, we examine the concept of rule rationality, which implies that people do not necessarily maximize their utility in each action, but rather follow behavioral rules that, on average, maximize utility. Building on Aumann (2019) and Heller and Winter (2016), we test this concept in a laboratory experiment. Participants were paired, presented with two games, and asked individually to choose whether or not to learn which game is being played. We show that subjects are more likely to choose not to learn when such behavior is part of the equilibrium path, i.e., they benefit from a commitment to forgo the information about which game is played. In addition, we find that subjects take into account the decision of their opponent on whether to commit, and may “punish” him if he strays from the equilibrium path. These results support the salience of rules of thumb in interactive decision-making and contribute to the development of a more comprehensive understanding of rationality.
Keywords: Rule rationality, Act rationality, Social decision-making, Rules of thumb
JEL Classification: D81, D03
Suggested Citation: Suggested Citation