Full-scale Real Tests of Consumer Behavior using Experimental Data

This paper reports the results of three experiments on the neoclassical theory of consumer behavior. All these experiments were performed with the aim to simulate as closely as possible the behavior of consumers in the real world. Real goods, real money and the same incentives as in the real world were used. The large number of participants (about 450 individuals) is another important characteristic of these experiments. Nonparametric tests using the theory of revealed preference show that a significant number of individuals have an inconsistent behavior. If a nearly optimizing behavior is postulated then most of these inconsistencies disappear but a model of random choices gives almost the same results. The hypothesis of a representative consumer (average behavior) seems a more fruitful approach. These experiments were designed so that both nonparametric and parametric tests could be used. A flexible functional form is estimated and the classical tests of homogeneity and symmetry show that there are no fundamental differences between the two types of