How the market responds to dynamically inconsistent preferences
AbstractThis paper responds to the 'soft paternalist' argument that the findings of behavioural economics make traditional objections to paternalism incoherent. We show that there is a normatively significant sense in which, even if individuals lack coherent preferences, competitive markets are efficient in providing them with opportunities to get what they want. Extending earlier analysis by Sugden, we model a multi-period 'storage economy' and explore the implications of dynamically inconsistent preferences. We show that, despite apparent conflicts of judgement between an individualÃ¢â¬â¢s 'selves', competitive markets provide maximal opportunity, and that they do so by facilitating voluntary exchanges between selves.
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Bibliographic InfoArticle provided by Springer in its journal Social Choice and Welfare.
Volume (Year): 38 (2012)
Issue (Month): 4 (April)
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Web page: http://link.springer.de/link/service/journals/00355/index.htm
Other versions of this item:
- Ben McQuillin & Robert Sugden, 2011. "How the market responds to dynamically inconsistent preferences," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 11-04, School of Economics, University of East Anglia, Norwich, UK..
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Douglas Bernheim & Antonio Rangel, 2007.
"Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics,"
07-031, Stanford Institute for Economic Policy Research.
- B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc.
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- Sugden, Robert, 2010. "Opportunity As Mutual Advantage," Economics and Philosophy, Cambridge University Press, vol. 26(01), pages 47-68, March.
- Cass R. Sunstein & Richard H. Thaler, 2003.
"Libertarian paternalism is not an oxymoron,"
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Social Choice and Welfare,
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- Robert Sugden, 2007. "The value of opportunities over time when preferences are unstable," Social Choice and Welfare, Springer, vol. 29(4), pages 665-682, December.
- Robert Sugden, 2011.
"The behavioural economist and the social planner: to whom should behavioural welfare economics be addressed?,"
Papers on Economics and Evolution
2011-21, Max Planck Institute of Economics, Evolutionary Economics Group.
- Robert Sugden, 2012. "The behavioural economist and the social planner: To whom should behavioural welfare economics be addressed?," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 12-05, School of Economics, University of East Anglia, Norwich, UK..
- Christian Schubert, 2012. "Opportunity and Preference Learning," Papers on Economics and Evolution 2012-08, Max Planck Institute of Economics, Evolutionary Economics Group.
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