An expected utility maximizer walks into a bar...

Daniel R. Burghart, Paul W. Glimcher, Stephanie C. Lazzaro

Research output: Contribution to journalArticlepeer-review

Abstract

We conducted field experiments at a bar to test whether blood alcohol concentration (BAC) correlates with violations of the generalized axiom of revealed preference (GARP) and the independence axiom. We found that individuals with BACs well above the legal limit for driving adhere to GARP and independence at rates similar to those who are sober. This finding led to the fielding of a third experiment to explore how risk preferences might vary as a function of BAC. We found gender-specific effects: Men did not exhibit variations in risk preferences across BACs. In contrast, women were more risk averse than men at low BACs but exhibited increasing tolerance towards risks as BAC increased. Based on our estimates, men and women's risk preferences are predicted to be identical at BACs nearly twice the legal limit for driving. We discuss the implications for policy-makers.

Original languageEnglish (US)
Pages (from-to)215-246
Number of pages32
JournalJournal of Risk and Uncertainty
Volume46
Issue number3
DOIs
StatePublished - Jun 2013

Keywords

  • Alcohol
  • Expected utility theory
  • Field experiment
  • Rationality
  • Risk aversion

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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