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Who Is (More) Rational?
Cited 131 time in
Web of Science
Cited 127 time in Scopus
- Authors
- Issue Date
- 2014-06
- Publisher
- American Economic Association
- Citation
- American Economic Review, Vol.104 No.6, pp.1518-1550
- 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.
- ISSN
- 0002-8282
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