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Article

Correcting for Random Budgets in Revealed Preference Experiments

Department of Economics, The Ohio State University, Columbus, OH 43210, USA
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Author to whom correspondence should be addressed.
Academic Editors: Georgios Gerasimou and Ulrich Berger
Games 2022, 13(2), 30; https://doi.org/10.3390/g13020030
Received: 18 February 2022 / Revised: 1 April 2022 / Accepted: 6 April 2022 / Published: 11 April 2022
(This article belongs to the Special Issue Developing and Testing Theories of Decision Making)
Experiments on revealed preference often use budget sets that are randomly and independently drawn according to some criteria for each participant. However, this means that the budget sets faced by different individuals are not the same. This paper proposes a method to control for these differences. In particular, we control for the “power” of different budget sets by examining the consistency of an individual’s choices relative to some simulated baseline behavior conditional on budgets faced by the individual. We apply this methodology to two existing experimental datasets. Our results show that failure to account for this variation results in a bias when looking directly at measures of choice consistency and the sign of this bias depends on the measure being used. However, controlling for this variation does not change the correlation between measures of choice consistency and observable demographic characteristics like income and education. View Full-Text
Keywords: revealed preference; random budgets revealed preference; random budgets
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MDPI and ACS Style

Mahmood, M.A.; Rehbeck, J. Correcting for Random Budgets in Revealed Preference Experiments. Games 2022, 13, 30. https://doi.org/10.3390/g13020030

AMA Style

Mahmood MA, Rehbeck J. Correcting for Random Budgets in Revealed Preference Experiments. Games. 2022; 13(2):30. https://doi.org/10.3390/g13020030

Chicago/Turabian Style

Mahmood, Mir Adnan, and John Rehbeck. 2022. "Correcting for Random Budgets in Revealed Preference Experiments" Games 13, no. 2: 30. https://doi.org/10.3390/g13020030

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