A measure of rationality and welfare
AbstractThere is evidence showing that individual behavior often deviates from the classical principle of maximization. This evidence raises at least two important questions: (i) how severe the deviations are and (ii) which method is the best for extracting relevant information from choice behavior for the purposes of welfare analysis. In this paper we address these two questions by identifying from a foundational analysis a new measure of the rationality of individuals that enables the analysis of individual welfare in potentially inconsistent subjects, all based on standard revealed preference data. We call such measure minimal index.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1220.
Date of creation: May 2010
Date of revision: Sep 2011
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Web page: http://www.econ.upf.edu/
Rationality; Individual Welfare; Revealed Preference.;
Other versions of this item:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D60 - Microeconomics - - Welfare Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-HAP-2010-06-04 (Economics of Happiness)
- NEP-UPT-2010-06-04 (Utility Models & Prospect Theory)
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