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A measure of rationality and welfare

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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 Angel Ballester, 2010. "A measure of rationality and welfare," Economics Working Papers 1220, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2014.
    • Handle: RePEc:upf:upfgen:1220
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    More about this item

    Keywords

    Rationality; Individual Welfare; Revealed Preference.;
    All these keywords.

    JEL classification:

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

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