parametric recoverability of preferences revealed preference theory is brought to bear on the problem of recovering approximate parametric preferences from consistent and inconsistent consumer choices we propose measures of the incompati

rebates matches and consumer behavior an experiment conducted to examine the effects of different discount formats on consumer purchases is reported participants made a series of purchase decisions for chocolate bars given 1 rebates from the listed price 2 matching quantities of chocolates for each bar purchased and 3 simple price reductions contrary to standard theoretical predictions and consistent with results in the context of charitable contributions by eckel and grossman 2003 we find that participants purchase significantly more chocolate bars under a matching sales format than under a comparable rebate format inattention to the net consequences of decisions as well as some rebate aversion explain the preference for matching discounts

revealed preference analysis of non cooperative household consumption we develop a revealed preference approach to analyse non unitary household consumption behaviour that is not cooperative or pareto efficient we derive global necessary and sufficient conditions for data consistency with the model we show that the conditions can be verified by means of relatively straightforward mixed integer programming methods which is particularly attractive in view of empirical analysis our framework extends to tests for separate spheres and joint contribution to public goods an application to data drawn from the russia longitudinal monitoring survey demonstrates the empirical relevance of the non cooperative consumption model

garp for kids on the development of rational choice behavior in this paper we examine the extent to which consumption choices by 7 and 11 year old children and college undergraduates satisfy the axioms of revealed preference we find that choices by even the 7 year olds are considerably more likely to obey revealed preference axioms than would be true if they were choosing randomly 11 year olds do better still while college students do no better than 11 year old children we also find that mathematical ability is not correlated with choosing rationally we argue that this evidence suggests that the ability to choose rationally is not innate but that it does develop quickly

the money pump as a measure of revealed preference violations we introduce a measure of the severity of violations of the revealed preference axioms the money pump index mpi the mpi is the amount of money one can extract from a consumer who violates the axioms it is also a statistical test for the hypothesis that a consumer is rational when behavior is observed with error we present an application using a panel data set of food expenditures the data exhibit many violations of the axioms mostly the mpi for these violations is small the mpi indicates that the hypothesis of consumer rationality cannot be rejected

innovation and trade with endogenous market failure the case of genetically modified products a partial equilibrium two country model is developed to analyze implications from the introduction of genetically modified gm products in the model innovators hold proprietary rights farmers are competitive adopters some consumers deem gm food to be inferior in quality to traditional food and the mere introduction of gm crops affects the costs of non gm food because of costly identity preservation among the results derived it is shown that although gm innovations have the potential to improve efficiency some groups can be made worse off indeed it is even possible that the costs induced by gm innovations outweigh the efficiency gains

norms of punishment experiments with students and the general population i introduction the issue of external validity of laboratory experiments has received increasing attention in the last decades while the vast majority of experiments are conducted with a fitting sample of college students it remains an open question whether the behavior observed in such studies is informative about society at large here we focus on experiments on social dilemmas to study other regarding preferences and civic norms of cooperation we compare cooperation levels in two distinct subject pools originating from the same geographical area one sample was drawn from the student population of a large public university student treatment the other sample was drawn from the general adult population representative treatment and stratified according to gender age and employment status everyone participated in public good games with and without opportunities for peer punishment there are many contributions in the literature that compare the behavior of students with other pools of participants with the explicit aim to test the external validity of laboratory experiments 1 the existing evidence appears to suggest that students are less prosocial than other subject pools for instance in a prisoner s dilemma students cooperate less than white collar workers bigoni casari and camera 2012 or bicycle messengers burks carpenter and goette 2009 similarly students are less prosocial than rural and urban citizens in a public good game gachter and herrmann 2011 than rural villagers in the appropriation of common pool resources cardenas 2005 and than employees in a dictator game carpenter burks and verhoogen 2005 dragone galeotti and orsini 2013 the gap remains when one compares students and professionals that is self selected subjects with a high degree of expertise who ordinarily deal with situations resembling the experimental task the evidence includes studies on voluntary contributions to a public good among elected officials butler and kousser 2013 and shrimp fishermen carpenter and seki 2011 threshold public goods without refunding among nurses bram cadsby and maynes 1998 trust games among ceo principals fehr and list 2004 2 more in general the most appropriate pool of participants should depend both on the task and the goal of the study for instance contractors may be a better sample than college students for the external validity of auction experiments dyer kagel and levin 1989 and villagers may be a better sample than city dwellers for experiments about the management of a renewable natural resource cardenas 2005 contractors and villagers are more appropriate than students in this case because they are more familiar with the experimental task and their behavior is more relevant because they are those who actually make the decisions in the field both aspects boost the external validity of the experimental results 3 the goal of the study is also relevant when studying issues of bounded rationality for instance one may prefer participants with very high or very low cognitive skills depending on the initial conjecture to be tested high score participants may be preferred when collecting evidence about the presence of a bound to rationality showing that game theorists choose numbers in a guessing game away from the nash equilibrium prediction provides more compelling evidence about the descriptive inaccuracy of the theory than using a representative sample of the general population camerer 2003 conversely participants with low cognitive skills who succeed at a task suggest that such task is not too demanding in short to enhance the external validity of experimental results one should recruit participants with a bias against the initial conjecture as we are interested in norms of cooperation and punishment of the society broadly defined the most appropriate pool of participants would be a representative sample of the population at large

revealed preference tests of the cournot model the aim of this paper is to develop revealed preference tests for cournot equilibrium the tests are akin to the widely used revealed preference tests for consumption but have to take into account the presence of strategic interaction in a game theoretic setting the tests take the form of linear programs the solutions to which also allow us to recover cost information on the firms to check that these nonparametric tests are sufficiently discriminating to reject real data we apply them to the market for crude oil publication abstract

a microeconometric model of the demand for health care and health insurance in australia this paper develops a model for interdependent demand for health insurance and health care under uncertainty to throw light on the issue of insurance induced distortions in the demand for health care services the model is used to empirically analyse the determinants of the choice of health insurance type and seven types of health care services using micro level data from the 1977 78 australian health survey econometric implementation of the model involves simultaneously issues of discreteness of choice selectivity and stochastic dependence between health insurance and utilization health status appears to be more important in determining health care service use than health insurance choice while income appears to be more important in determining health insurance choice than in determining health care service use for a broad range of health care services both moral hazard and self selection are found to be important determinants of utilization of health care services

an experiment on the pure theory of consumer s behaviour by checking whether consumer demand satisfies the axioms of revealed preference one can test the empirical validity of the neoclassical theory of consumer behaviour however applying the axioms to actual consumer purchase data is difficult if not impossible since it poses serious problems of both a methodological and a practical nature after commenting on the few existing empirical studies in this field we summarise the results from an experimental approach to revealed preference theory data were obtained through a controlled experiment that involved real consumption of the goods chosen we find that most subjects violated the axioms

the revealed preference approach to collective consumption behaviour testing and sharing rule recovery we present a revealed preference methodology for empirically analysing collective consumption behaviour first we introduce an integer programming ip methodology for testing data consistency with collective consumption models that account for publicly as well as privately consumed goods this ip methodology can include information on assignable quantities for private goods next we show that the ip methodology allows for recovering the personalized lindahl prices for the public goods and the personalized quantities for the private goods in turn this implies recovery of the sharing rule i e personalized income share levels an empirical application demonstrates the practical usefulness of the

the development of egalitarianism altruism spite and parochialism in childhood and adolescence we study how the distribution of other regarding preferences develops with age based on a set of allocation choices we classify each of 717 subjects aged 8 17 years as either egalitarian altruistic or spiteful we find a strong decrease in spitefulness with increasing age egalitarianism becomes less frequent and altruism much more prominent with age females are more frequently classified as egalitarian than males and less often as altruistic by varying the allocation recipient as either an in group or an out group member we also study how parochialism develops with age parochialism emerges significantly in the teenage years

economic behavior of children and adolescents a first survey of experimental economics results abstract about 15 years ago economic experiments with children and adolescents were considered as an extravagant niche of economic research since then this type of research has exploded in scope and depth it has become clear that studying the development of economic behavior and its determinants is important to understand economic behavior of adults and to provide a basis for potential policy interventions with respect to economic behavior in childhood and adolescence given the huge increase of papers we provide the first overview of economic experiments with children and adolescents we focus on the following aspects rationality of choices risk preferences time preferences social preferences cooperation and competitiveness all of these aspects are analyzed with respect to the influence of age and gender and we also consider the role of socio economic status or interventions

social identity and inequality the impact of china s hukou system abstract we conduct an experimental study to investigate the causal impact of social identity on individuals performance under incentives we focus on china s household registration hukou system which favors urban residents and discriminates against rural residents in resource allocation our results show that making individuals hukou identity salient significantly reduces the performance of rural migrant students relative to their local urban counterparts on an incentivized cognitive task and consequently significantly lowers their relative ranking in the earnings distribution under the piece rate regime however the impact of hukou identity salience is insignificant in the tournament regime suggesting that its negative effect on migrant students performance may be mitigated when competition is introduced the results demonstrate the impact of institutionally imposed social identity on individuals economic performance and potentially on inequality

do rational demand functions differ from irrational ones evidence from an induced budget experiment various studies e g becker 1962 ariely et al 2003 have noted anomalies concerning the relationship between observed demand and the preferences presumed to motivate it we re examine these findings using experimental choice data after separating our subjects choices into rational and irrational subsets based on consistency with the axioms of revealed preference we estimate and compare demand coefficients mirroring ariely et al s coherently arbitrary choice both rational and irrational demand estimates exhibit negative price and positive endowment coefficients however a comparison of the full set of demand coefficients indicates significant differences between the two yielding an observable artefact of the preference hypothesis relaxing the goodness of fit of the revealed preference test afriat 1987 varian 1994 does not alter our findings

who is more rational we report on the results of a large scale field experiment that enables us to test for consistency with utility maximizing behavior and to investigate the correlation between individual behavior and demographic and economic characteristics we conducted the experiment with the centerpanel a representative sample of over 2 000 dutch households using procedures similar to those used by choi et al 2007b in a setting with risk we find a high level of consistency in the individual level decisions there is also considerable heterogeneity in subjects consistency scores high income and high education subjects display greater levels of consistency men are more consistent than women and young subjects are more consistent than those who

how demanding is the revealed preference approach to demand a well known problem with revealed preference methods is that when data are found to satisfy their restrictions it is hard to know whether this should be viewed as a triumph for economic theory or a warning that these conditions are so undemanding that almost anything goes this paper allows researchers to make this distinction our approach uses an axiomatic characterization of a measure of predictive success due to selten 1991 we illustrate the idea using a panel dataset the results show that this approach can lead us to radically reassess our view of the empirical performance of economic theory

how basic are behavioral biases evidence from capuchin monkey trading behavior behavioral economics has demonstrated systematic decision making biases in both lab and field data do these biases extend across contexts cultures or even species we investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles we show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles including reference dependence and loss aversion given our capuchins inexperience with money and trade these results suggest that loss aversion extends beyond humans and may be innate rather than learned

the anatomy of distributional preferences with group identity abstract the increasing diversity of societies raises questions about the consequences for redistributive preferences this paper assesses the impact of social identity on distributional preferences in a modified dictator game i estimate individual level utility functions with two parameters that govern the trade offs between equity and efficiency and giving to self and to other subjects on average put less weight on income of the out group the out group treatment also changes the distribution of equity efficiency concerns however the experiment also uncovers a large individual heterogeneity of preferences an analysis of garp violations reveals that choices in both treatments overwhelmingly stem from well behaved yet systematically different underlying utility functions hence the evidence presented here suggests that the rational choice approach is a useful tool for understanding the effect of social identity on preferences

introduction to the special issue things we do and don t understand about the household and the environment environmental economics has been slow to incorporate the full and complex nature of the household into its analytical structures and to reflect empirical evidence on household decision making this paper provides an overview of some of the main unanswered questions

nonparametric comparative revealed risk aversion abstract we introduce a nonparametric method to compare risk aversion of different investors based on revealed preference methods using yaari s 1969 50 definition of more risk averse than we show that it is sufficient to compare the revealed preference relations of two investors this makes the approach operational the central rationalisability theorem provides strong support for this approach we also provide a measure of economic significance to quantify the differences in risk aversion which can also help to interpret differences in risk aversion in parametric models the approach is an alternative or complement to parametric approaches and a robustness check as a necessary first step towards this comparative approach we show how to test data for consistency with stochastic dominance relations which can also be used to recover larger parts of preferences we include an application to experimental data by choi et al 2007 10 11 which demonstrates the potential of the comparative approach

a measure of rationality and welfare evidence showing that individual behavior often deviates from the classical principle of preference maximization has raised at least two important questions 1 how serious are the deviations 2 what is the best way to analyze choice behavior in order to extract information for the purpose of welfare analysis this paper addresses these questions by proposing a new way to identify the preference relation that is closest in terms of welfare loss to the revealed choice

children s rationality risk attitudes and field behavior abstract we investigate the relationship between risk attitudes choice consistency and field behavior of children by conducting economic experiments with 1275 8th graders choices are not completely consistent with any of the economic theories we consider however they are not random either we use our experimental data to structurally estimate risk preferences and correct for decision error using a measure constructed from the estimates and individual choices we find that risk preferences do predict future field behavior children who are more risk averse are less likely to receive disciplinary referrals one and two years after the experiment and are more likely to complete high school even controlling for economic rationality family background scholarly achievement and past misbehavior accounting for decision error turns out to be important as a simple aggregate measure of risk is not found to be correlated with field behavior

homothetic efficiency theory and applications we provide a nonparametric revealed preference approach to demand analysis based on homothetic efficiency homotheticity is widely assumed often implicitly because it is a convenient and often useful restriction however this assumption is rarely tested and data rarely satisfy testable conditions to overcome this we provide a way to estimate homothetic efficiency of consumption choices the method provides considerably higher discriminatory power against random behavior than the commonly used afriat efficiency we use experimental and household survey data to illustrate how our approach is useful for different empirical applications and can provide greater predictive success

exploring the capability to reason backwards an experimental study with children adolescents and young adults this is the first study investigating the development of the capability to reason backwards in children adolescents and young adults aged 6 to 23 under controlled laboratory conditions the experimental design employs a modified version of the race game as in the original game subjects need to apply backward analysis in order to solve the games we find that subjects capability to reason backwards improves with age but that this process systematically differs across genders our repetition of the games indicates that differences exist also in learning between age groups and across genders

does market experience promote rational choice experimental evidence from rural ethiopia abstractwe organize a field experiment with sesame farmers and brokers in northern ethiopia to explore whether market experience fosters rational behavior proxied by fewer generalized axiom of revealed preference garp violations in a simple choice experiment in the baseline study farmers and brokers performed equally well or badly which is consistent with qualitative evidence that the prior trading experience of our brokers is not obtained in a competitive setting following random assignment to a competitive market setting a one day trading session in a sesame auction we find that treated farmers and brokers behave more rationally than their peers in the control group

children as consumers investigating child diary expenditure data we investigate expenditure behaviour of school aged children using child diary information contained in the british family expenditure survey the estimates from an almost ideal demand system aids for child expenditure suggest that drinks sweets books and toys are normal goods for children but clothes travel leisure and vice prod ucts are luxury items with income elasticities greater than one being a lone parent child and having a working mother are important factors in determining child expenditure de cisions importantly a higher parental budget share on any given commodity is typically associated with an increased child budget share on the same commodity jel classification dll d12 j13

the incentive effects of affirmative action in a real effort tournament abstract affirmative action policies bias tournament rules in order to provide equal opportunities to a group of competitors who have a disadvantage they cannot be held responsible for its implementation affects the underlying incentive structure which might induce lower performance by participants and additionally result in a selected pool of tournament winners that is less efficient in this paper we study the empirical validity of such concerns in a case where the disadvantage affects capacities to compete we conducted real effort tournaments between pairs of children from two similar schools who systematically differed in how much training they received ex ante on the task at hand contrary to the expressed concerns our results show that the implementation of affirmative action did not result in a significant performance loss for either advantaged or disadvantaged subjects instead it rather enhanced the performance for a large group of participants moreover affirmative action resulted in a more equitable tournament winner pool where half of the selected tournament winners came from the originally disadvantaged group hence the negative selection effects due to the biased tournament rules were at least partially offset by performance enhancing incentive effects

patience among children abstract recent policy initiatives offer cash payments to children and often their families to induce better health and educational choices these policies implicitly assume that children are especially impatient i e have high discount rates however little is known about the nature of children s patience how it varies across children and whether children can even make rational inter temporal choices this paper examines the inter temporal choices of 5 to 16 year old children in an artefactual field experiment we examine their choices between varying levels of compensation received in 2 or 4 months in the future and in 0 or 2 months in the future we find that children s choices are consistent with hyperbolic discounting boys are less patient than girls older children are more patient and that mathematical achievement test scores private schooling and parent s patience are not correlated with children s patience we also find that although more than 25 of children do not make rational inter temporal choices within a single two period time frame we cannot find variables that explain this behavior other than age and standardized mathematical achievement test scores