Research

ABSTRACT: We investigate whether the standard definition of economic rationality as consistency is correlated with decision-making ability. We argue that documented positive correlations are often based on incorrect identification strategies due to potential confounding factors. We use a theoretical framework to define consistency and a novel experimental design to show that consistency and decision-making ability are logically independent. Then, we investigate the factors that, in our experiment, drive violations of consistency. We find that the use of heuristics is by far the major driver of consistency and is not correlated with decision-making ability measured as cognitive sophistication and level of understanding of the design. Overall, our experimental evidence raises doubts about the choice of language that equates consistency with rationality in economics. 

ABSTRACT: In this paper, we provide a constructive proof for threshold representations of partial orderings in a finite setting and extend the construction to arbitrary sets. This contributes to a long-standing open problem posed in Nakamura (2002) and Aleskerov, Bouyssou, & Monjardet (2007). We identify and discuss aspects of our proof that do not directly generalize to an infinite setting and, for each, provide intuitive sufficient conditions.

ABSTRACT: Accumulated experimental evidence shows that, when people have the opportunity to cheat, they often take it. Most literature on cheating opportunities forces people into a tempting situation where they face a trade-off between money and morality. In our paper, we ask whether people are sophisticated in their cheating behavior and whether they search for or avoid these trade-offs. Overall, participants in the experiment exhibit very little temptation, i.e., virtually no one is willing to pay a cost to avoid the possibility of misreporting in a coin-flip-like task, and they are able to stick to their plan consistently. Participants with a strict preference for the tempting situation, i.e., those who are planning to cheat, show a winning rate of about 95% and those who are indifferent between having and not having the opportunity, i.e., who are planning to be honest, show a winning rate that is close to 50%. 

ABSTRACT: We study the relationship between imperfect discrimination, similarity, and stochastic transitivity in generalized versions of Perturbed Utility (Fudenberg et al. 2015) and Fechnerian models (Debreu, 1958). We show that these models are equivalent and that, within them, the properties of a similarity function can characterize all notions of stochastic transitivity (as Weak, Moderate, and Strong). Specifically, Natenzon & He (2023) have recently shown that choice probabilities are moderately transitive if and only if the similarity function is a metric. We provide a counterpoint and show that unless choice probabilities are strongly transitive, the similarity function can violate the triangle inequality.

ABSTRACT: The Random Utility Model (RUM) is the leading model to represent the aggregate choices of a heterogeneous population of preference maximizers. We show that if (and only if) preferences are sufficiently uncorrelated, RUM choices can also be generated by a population of decision makers who do not maximize any preference. In proving this result, we also characterize the general class of choices generated by such irrational populations, with applications beyond the RUM framework. We discuss the relevance of our results for the falsifiability of the rational interpretation of RUMs, the inference of individual rationality from aggregate choices, and the nature of welfare judgments. 

ABSTRACT: Eliciting preferences from decision-makers who are not utility maximizers implies an intrinsic trade-off between obtaining a coarse preference and an incorrect one (false-positive). Some current tools minimize false-positives but become coarser and coarser as the dataset grows. We propose an informational property [Informational Responsiveness] that limits the coarseness problem and, as the dataset grows, characterizes a family of tools that can successfully elicit the underlying preference from a broad set of models. Through a novel experiment, we show that these tools substantially reduce the coarseness of the elicited preference while only marginally increasing false-positives. In fact, if the researcher is forced to resolve the uncertainty given by the coarseness of the elicited preference, we show that our proposal leads to a substantial reduction in the expected number of false positives.

ABSTRACT: We characterize regularity, a common fingerprint of choice overload, within the General Luce Model (Echenique & Saito, 2019). We identify choice overload as the subset of regularity violations that generate welfare losses. We then provide necessary and sufficient conditions for choice overload and, in doing so, propose a test to disentangle two well-known causes: low discriminatory power (Frick, 2016) and limited attention (Lleras et al., 2017).

ABSTRACT: Mistakes in decision making can have serious consequences; while adult choice behaviour is well studied, much less is known about how children make decisions. We study experimentally how children's ability to avoid choice errors develops over time, focusing on both riskless and risky decisions among primary school children. Unsurprisingly, inconsistent or erroneous choices in younger children abound. However, by ages 10–11, some display error rates comparable to adults. We also identify a framing effect—correlation neglect—previously only studied in adults. Our findings are consistent with a limited stochastic consideration choice model, reflecting the bounded nature of children's decision-making.