Revealed Preferences, Choices, and Psychological Indexes
This paper develops a model of choice that embeds some psychological aspects affecting decision maker's behaviour. In the model, the decision maker attaches an unobservable psychological index -representing, e.g., the level of perceived availability or the level of salience- to each alternative in a universal collection. Choice behaviour of the decision maker is then conditioned by the indexes attached to the alternatives. With this paper we show that, if the conditional choice behaviour satisfies two intuitively appealing properties -namely Monotonicity and Conditional IIA- then the observable part of the choice behaviour, i.e., the unconditional choices, can be interpreted as the product of the maximization of a preference relation. The paper discusses also some welfare consideration regarding the choice model and finally some interpretations of the indexes are provided.
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"Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics,"
07-031, Stanford Institute for Economic Policy Research.
- 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.
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