Insensitivity to Prices in a Dictator Game
In this
paper we examine the relationship between prices and violations of the Generalized
Axiom of Revealed Preference (GARP) in dictator games. Using new experimental
data and a new algorithm that adjusts budget prices to eliminate GARP
violations, we introduce a new measure of consistency of choices, and we
identify a systemic relationship between prices and violations. We find that
pushing prices away from extremes tends to eliminate the violations of most
subjects, a phenomenon that we call “price insensitivity”.
[ - ]