A Measure of Rationality and Welfare
Evidence showing that individual behavior often deviates from the classical principle of preference maximization has raised at least two important questions: (i) How serious are the deviations? and (ii) What is the best way to analyse choice behavior in order to extract information for the purpose of welfare analysis? This paper addresses these questions by proposing a new way to identify the preference relation which is closest, in terms of welfare loss, to the revealed choice.
|Date of creation:||Oct 2014|
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- Tim Beatty & Ian Crawford, 2010.
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CWP17/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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1286, California Institute of Technology, Division of the Humanities and Social Sciences.
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- 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.
- Douglas Bernheim & Antonio Rangel, 2007. "Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics," Discussion Papers 07-031, Stanford Institute for Economic Policy Research.
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- Federico Echenique & Sangmok Lee & Matthew Shum, 2011. "The Money Pump as a Measure of Revealed Preference Violations," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1201 - 1223.
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