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The Limit of Public Policy: Endogenous Preferences

Author

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  • Bar-Gill, O.
  • Fershtman, C.

Abstract

In designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy. Public policy may also affect the formation of preferences and norms in a society. The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior. In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good.

Suggested Citation

  • Bar-Gill, O. & Fershtman, C., 2001. "The Limit of Public Policy: Endogenous Preferences," Papers 2001-5, Tel Aviv.
  • Handle: RePEc:fth:teavfo:2001-5
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Heifetz, Aviad & Shannon, Chris & Spiegel, Yossi, 2007. "What to maximize if you must," Journal of Economic Theory, Elsevier, vol. 133(1), pages 31-57, March.
    2. Aviad Heifetz & Ella Segev & Eric Talley, "undated". "Market Design with Endogenous Preferences," University of Southern California Legal Working Paper Series usclwps-1001, University of Southern California Law School.
    3. G Th, Werner & Ockenfels, Axel, 2005. "The coevolution of morality and legal institutions: an indirect evolutionary approach," Journal of Institutional Economics, Cambridge University Press, vol. 1(02), pages 155-174, December.
    4. Heifetz, Aviad & Shannon, Chris & Spiegel, Yossi, 2002. "What to Maximize If You Must," Department of Economics, Working Paper Series qt0hj6631n, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    5. Janssen, Maarten C. W. & Mendys-Kamphorst, Ewa, 2004. "The price of a price: on the crowding out and in of social norms," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 377-395, November.
    6. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2007. "The Dynamic Evolution of Preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 251-286, August.
    7. Heifetz, Aviad & Segev, Ella & Talley, Eric, 2007. "Market design with endogenous preferences," Games and Economic Behavior, Elsevier, vol. 58(1), pages 121-153, January.

    More about this item

    Keywords

    PUBLIC POLICY ; BEHAVIOUR ; PUBLIC GOODS;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • P5 - Economic Systems - - Comparative Economic Systems

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