Intrapersonal Utility Comparisons as Interpersonal Utility Comparisons: Welfare, Ambiguity, and Robustness in Behavioral Policy Problems

Canishk Naik and Daniel Reck

No 32813, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider the optimal policy problem of a benevolent planner, who is uncertain about an individual's true preferences because of inconsistencies in revealed preferences across behavioral frames. We adapt theories of expected utility maximization and ambiguity aversion to characterize the planner's objective, which results in welfarist criteria similar to social welfare functions, with intrapersonal frames replacing interpersonal types. Under paternalistic risk aversion or ambiguity aversion, a policy is less desirable to the planner, holding all else fixed, when it leads to more disagreement about welfare from revealed preferences. We map some examples of behavioral models into our framework and describe how this notion of robustness plays out in applied settings.

JEL-codes: D60 H0 I3 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-mic and nep-upt
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