Choice and Normative Preference
AbstractDue to factors such as temptation, choices may not respect normative prefer- ence (the agent.s own, subjective view of what constitutes his welfare). Neverthe- less, the evidence on preference reversals suggests a means of recovering normative preference from choice. A de.nition of normative preference in terms of choices between su¢ ciently delayed alternatives is formulated and studied. Mild condi- tions on behavior are shown to ensure the existence of a normative preference. Two characterizations are provided. It is demonstrated that a notion of welfare may exist inspite of dynamic inconsistency of preferences. An application shows that the evidence on hyperbolic discounting implies that agents.normative discount functions must be exponential.
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Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2005-039.
Length: 38 pages
Date of creation: Oct 2005
Date of revision:
Preference Reversals; Welfare; Temptation; Hyperbolic Discount- ing; Ethics.;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-28 (All new papers)
- NEP-CBE-2006-10-28 (Cognitive & Behavioural Economics)
- NEP-DCM-2006-10-28 (Discrete Choice Models)
- NEP-HPE-2006-10-28 (History & Philosophy of Economics)
- NEP-UPT-2006-10-28 (Utility Models & Prospect Theory)
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