Now you’re introducing yet another arbitrary ruler: high or low value. This doesn’t exist. There is only personal (subjective) value and personal context, and the concepts I’ve explained are always at work.
Example:
I’ve never in my life checked if there was glass in the milk karton (or any other karton) that I’ve drank directly from. Irrational? No. I’m relying on the fact that multi-billion dollar companies stand to lose massive amounts of money if they aren’t 100% careful with that stuff. Every day, millions of these products are consumed and so these products are constantly tested. If something was up it would quickly show up and there would be an immediate big time uproar.
Should all these millions of people tediously check everything they drink? No, that would be a massive waste of time.
Another mechanism that is at work is that if there was product information that could be captured and relayed to consumers at a profit, then we would expect firms to jump at that possibility of profit. And so, for any old and well-developed market, there is little rational reason to worry about that stuff.
Example:
It’s profitable to provide consumer reviews of computer parts (sell magazines, sell ads, etc). Those reviews exist in abundance and are a strong check on safety, quality and price. There is little reason to worry that you’re buying garbage. Companies that underperform are simply outcompeted in this cut-throat industry, and consumer reviews have everything to do with that. It’s power is so strong that only a small part of actual buyers has to deeply inform itself for the mechanism to operate.
Here’s a fairly well written article to get you started: http://econlib.org/library/Columns/y2010/McKenzierational.html
It delves into the criticism you were faced with and how markets give us incentives to be more rational.
So… the article claims that behavioralists try to empirically falsify the economist’s assumption of rationality, but the empirical tests are contrived and don’t match up with the real world, which is actually pretty rational.
I think mises does a good job of deflecting critics’ fears about consumers getting taken in by flashy advertising etc. He points out that whatever underhanded techniques are available to promote a product are available to everyone, so that purveyors of a crappy product will always be at a disadvantage that no marketing can ever make up for. His competitors with better products can simply employ the same marketing strategies.
Well, not falsify in a malicious manner (at least I don’t think). More like their methods of seeing how ‘rational’ someone really is don’t hold much water since the constraints placed on the testee are ridiculous and don’t apply to the real world. They also don’t take into account the fact that markets provide an incentive to be more rational because being irrational will lead to a loss. Since markets pressure people to be more rational than they would have otherwise been the assumption of a rational consumer is acceptable to make.
Have there ever been any experiments where the participants are rewarded, can communicate, and have repeat trials?
Not to my knowledge, but I barely keep up with behavioral economics/psychology studies (I don’t really keep up with the field in general).
I’m not sure why you don’t. Perhaps you don’t understand how useless monopolistic parasites are… Information is a commodity, to be provided like the market like any other one. The FDA is of course a resounding success of the government mandating information to be provided, so who are we peons to disagree?