Data and code for: A Kinky Consistency

Principal Investigator(s): View help for Principal Investigator(s) Emiliano Huet-Vaugn, Pomona College; Ethan McClure, U.C. Berkeley; Juan Carlos Suarez Serrato, Stanford GSB

Version: View help for Version V1

Name	File Type	Size	Last Modified
functions			12/21/2023 01:54:PM
intermediateResults			12/21/2023 01:54:PM
output			12/21/2023 01:54:PM
subFunctions			12/21/2023 02:23:PM
temp			12/21/2023 02:24:PM
choicePlots.m	text/x-objcsrc	1 KB	12/21/2023 08:54:AM
consistency.m	text/x-objcsrc	3.6 KB	12/21/2023 08:54:AM
consistency_figures.m	text/x-objcsrc	1.9 KB	12/21/2023 08:54:AM
interface.m	text/x-matlab	1017 bytes	12/21/2023 08:54:AM
main.m	text/x-matlab	1.1 KB	12/21/2023 08:54:AM

Project Description

Summary: We test a central assumption of economic analysis: that individuals display stable preferences across settings. Motivated by the fact that individuals face nonlinear budget constraints in myriad situations, we use a laboratory experiment to characterize how revealed preferences are affected by changes in the complexity of the budget set environment. We find that choices under kinked (piece-wise linear and convex) budgets exhibit a similar degree of rationality as choices under linear budgets—with very high levels of internally consistent behavior in each setting.However, for about half the subjects, individual choices across settings are inconsistent with the maximization of a stable SARP-satisfying preference. Relative to those who act consistently across settings, subjects displaying such arbitrary consistency exhibit large and significant changes in utility parameters, risk premiums, and price elasticities across settings. Finally, we show that subjects with initially more sophisticated decision rules are most susceptible to changes in complexity.

Scope of Project

JEL Classification:
      C13 Estimation: General
      C91 Design of Experiments: Laboratory, Individual
      D01 Microeconomic Behavior: Underlying Principles
      D81 Criteria for Decision-Making under Risk and Uncertainty
      D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

Geographic Coverage: Laboratory Data (UC Berkeley)

Universe: UC Berkeley Undergraduates.

Data Type(s): experimental data

Collection Notes: Data collected across 4 separate session spanning 6 months.

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Published Versions

V1 [2024-07-22]

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