Rule Rationality: Evidence from the Lab

32 Pages Posted: 29 Aug 2020

See all articles by Emanuel Kandel

Emanuel Kandel

Hebrew University of Jerusalem, Department of Economics, Students

Yevgeny Mugerman

Bar Ilan University

Eyal Winter

Hebrew University of Jerusalem - Department of Economics

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

Kandel, Emanuel and Mugerman, Yevgeny and Winter, Eyal, Rule Rationality: Evidence from the Lab (July 23, 2020). Available at SSRN: https://ssrn.com/abstract=3658973 or http://dx.doi.org/10.2139/ssrn.3658973

Emanuel Kandel

Hebrew University of Jerusalem, Department of Economics, Students ( email )

Jerusalem
Israel

Yevgeny Mugerman (Contact Author)

Bar Ilan University ( email )

Ramat Gan
5290002
Israel

Eyal Winter

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel

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