Experimental Design
Baseline Condition
A decision maker (DM) is endowed with 100 points to select a bundle of commodities, commodity A and commodity B. The prices of the two commodities are based on different exchange rates between points and payoffs. Thus, a decision obtains a tuple (x, p) whereby a DM selects a bundle (xA, xB) under the prices (pA, pB). Since measuring rationality requires a collection of such decisions, we include 25 tasks with randomly generated prices (Choi et al., 2014). After that, we measure the economic rationality of these 25 decisions, (xi, pi) (i=1,…, 25) based on the extent to which there exists some well-behaved utility functions to rationalize them.
To measure rationality across different preference domains, we vary the commodities in the decision tasks. In the first domain, the two commodities are specified as two contingent securities, in which the decisions capture the DM’s risk preference (Choi et al., 2007). In the second domain, the two commodities are rewards set for today and one month later, which are designed to examine the DM’s time preference (Andreoni and Sprenger, 2012). In the third domain, the two commodities are payoffs for the DM and another randomly matched subject, and thus the allocation captures the DM’s social preference (Andreoni and Miller, 2002; Fisman et al., 2007). Finally, in the fourth domain, the two commodities are the amount of ham and tomatoes, which captures the DM’s food preference (Harbaugh et al., 2001).
The Price Frame Condition
The Price Frame condition proceeds exactly as the Baseline condition except that we use a different price quote method. In the Baseline condition, we use “1 point = X units of commodity” to present price information. In the Price Frame condition, we change it to “Y points = 1 unit of commodity”.
The Discrete Choice Condition
The Discrete Choice condition proceeds exactly as the Baseline condition except that we use a discrete options scheme. In the Baseline condition, subjects are asked to report any allocation on the budget line. In the Discrete Choice condition, subjects are presented with 11 options selected from the budget line and are asked to choose one of the 11 options.