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Indecisiveness in behavioral welfare economics

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  • Mandler, Michael

Abstract

When an individual's preferences depend on the time or ‘frame’ at which decisions are made, the preferences that appear at different frames must be aggregated in order to make social decisions. Suppose we aggregate each individual i's frame-based preferences with a ‘behavioral welfare relation’ that ranks x above y if, when both x and y are available, i sometimes choose x and not y and never chooses y and not x. The set of Pareto optima can then be large. In fact a small amount of preference diversity across frames can cause every allocation to be Pareto optimal. More generally, the set of Pareto optima will have the same dimension as the set of allocations. The Pareto criterion then will not be able to discriminate locally among policy options. A small distortion, for example, will call for no policy response.

Suggested Citation

  • Mandler, Michael, 2014. "Indecisiveness in behavioral welfare economics," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 219-235.
  • Handle: RePEc:eee:jeborg:v:97:y:2014:i:c:p:219-235
    DOI: 10.1016/j.jebo.2013.04.010
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. B. Douglas Bernheim, 2010. "Behavioral welfare economics," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(2), pages 123-151, June.
    2. Sophie Bade, 2010. "Pareto-Optimal Matching Allocation Mechanisms for Boundedly Rational Agents," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2010_47, Max Planck Institute for Research on Collective Goods.
    3. Sophie Bade, 2016. "Pareto-optimal matching allocation mechanisms for boundedly rational agents," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(3), pages 501-510, October.

    More about this item

    Keywords

    Behavioral welfare economics; Incomplete preferences; Pareto optimality;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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