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A Measure of Rationality and Welfare

Author

Listed:
  • Jose Apesteguia
  • Miguel Ángel Ballester

Abstract

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.

Suggested Citation

  • Jose Apesteguia & Miguel Ángel Ballester, 2014. "A Measure of Rationality and Welfare," Working Papers 573, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:573
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    File URL: http://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/573.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Cuhadaroglu, Tugce, 2015. "Choosing on Influence," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-59, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Ghosal, Sayantan & Dalton, Patricio, 2013. "Characterizing Behavioral Decisions with Choice Data," CAGE Online Working Paper Series 107, Competitive Advantage in the Global Economy (CAGE).
    3. Tugce Cuhadaroglu, 2015. "Choosing on Influence," Discussion Paper Series, School of Economics and Finance 201504, School of Economics and Finance, University of St Andrews.
    4. Apesteguia, Jose & Ballester, Miguel A., 2013. "Choice by sequential procedures," Games and Economic Behavior, Elsevier, vol. 77(1), pages 90-99.
    5. Yusufcan Masatlioglu & Daisuke Nakajima, 2015. "Completing Incomplete Revealed Preference Under Limited Attention," The Japanese Economic Review, Japanese Economic Association, vol. 66(3), pages 285-299, September.
    6. 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.
    7. Cuhadaroglu, Tugce, 2015. "Choosing on Influence," SIRE Discussion Papers 2015-59, Scottish Institute for Research in Economics (SIRE).

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    More about this item

    Keywords

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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D60 - Microeconomics - - Welfare Economics - - - General

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