Measuring Economic Rationality Using Budgetary Experiment

Last registered on July 19, 2023

Pre-Trial

Trial Information

General Information

Title
Measuring Economic Rationality Using Budgetary Experiment
RCT ID
AEARCTR-0011750
Initial registration date
July 12, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
July 19, 2023, 2:04 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation
Xiamen University, School of Economics

Other Primary Investigator(s)

PI Affiliation
Tsinghua University
PI Affiliation
Tsinghua University
PI Affiliation
National University of Singapore, New York University Abu Dhabi, Hong Kong University of Science and Technology

Additional Trial Information

Status
In development
Start date
2023-07-17
End date
2023-07-21
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
This study aims at measuring human subjects’ economic rationality using budgetary experiments in four domains: risk, time, social, and food preferences. In each domain, there are 25 decision tasks, whereby subjects are endowed with 100 points to allocate between two commodities with different prices. We measure economic rationality by assessing the consistency of subjects’ 25 decisions with utility maximization in classic revealed preference theory. Subjects are randomly assigned to three conditions. In the Baseline condition, subjects perform the classical budgetary experiments in all four domains with random order. The Price Frame condition proceeds exactly as the Baseline condition except that we use a different price quote method. In the Discrete Choice condition, subjects are asked to choose among 11 discrete options schemes from the budget line instead of choosing any scheme from the budget line.
External Link(s)

Registration Citation

Citation
Chen, Yiting et al. 2023. "Measuring Economic Rationality Using Budgetary Experiment." AEA RCT Registry. July 19. https://doi.org/10.1257/rct.11750-1.0
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
Intervention Start Date
2023-07-17
Intervention End Date
2023-07-21

Primary Outcomes

Primary Outcomes (end points)
1. Critical cost efficiency index (CCEI; Afriat, 1972)
2. Compliance with downward-sloping demand, i.e., the Spearman’s correlation coefficient between ln(xA/xB) and ln(pA/pB) (Echenique et al., 2023)
3. Estimated parameters in models for risk, time, social, and food preferences
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

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.
Experimental Design Details
Randomization Method
Randomization will be done by the program built in Qulatrics.
Randomization Unit
This is a between-subject experiment. Subjects will be randomly assigned to three conditions, Baseline, Price Frame, and Discrete Choice.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
We have three conditions.
Sample size: planned number of observations
We plan to recruit 300 people in total.
Sample size (or number of clusters) by treatment arms
We plan to recruit 100 people for each condition.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
The Institutional Review Board of Finance and Economics Experimental Laboratory
IRB Approval Date
2023-07-12
IRB Approval Number
FEEL230701

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials