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 individualâ€™s 'selves', competitive markets provide maximal opportunity, and that they do so by facilitating voluntary exchanges between selves.
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Bibliographic InfoPaper provided by School of Economics, University of East Anglia, Norwich, UK. in its series Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) with number 11-04.
Date of creation: 01 Feb 2011
Date of revision:
Postal: Helen Chapman, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
Other versions of this item:
- Ben McQuillin & Robert Sugden, 2012. "How the market responds to dynamically inconsistent preferences," Social Choice and Welfare, Springer, vol. 38(4), pages 617-634, April.
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