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Random behavior and the as-if defense of rational choice theory in demand experiments

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Rational choice theory (RCT) models decision makers as utility maximizers and is often defended via an as-if argument. According to this argument, although real individuals do not consciously maximize their utility function, their choices can be explained as if they were generated by utility maximization. An alternative model is random-choice, which assumes that decision makers pick up an element from a given set according to a uniform distribution on the set. In this paper we examine a series of experiments that compare RCT and the random-choice model as alternative explanations of consumer demand, and investigate how these experiments contribute to clarifying the actual scope of RCT and the shortcomings of the standard as-if defense of it.

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en

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application/pdf

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http://eprints.lse.ac.uk/27001/1/random_behaviour_%28LSERO%29.pdf

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