How are Preferences Revealed?

John Beshears, James Jinwoo Choi, David Laibson () and Brigitte C. Madrian

No 13976, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Revealed preferences are tastes that rationalize an economic agent’s observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third- party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes.

JEL-codes: A11 B4 D01 D60 G11 H1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-mkt, nep-pbe and nep-upt
Date: 2008-05
Note: AG AP PE
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w13976.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: How Are Preferences Revealed? (2007)
Journal Article: How are preferences revealed? (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:13976

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w13976
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().