A Measure of Rationality and Welfare

Jose Apesteguia and Miguel Ballester

Journal of Political Economy, 2015, vol. 123, issue 6, 1278 - 1310

Abstract: Evidence showing that individual behavior often deviates from the classical principle of preference maximization has raised at least two important questions: (1) How serious are the deviations? (2) What is the best way to analyze 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 that is closest, in terms of welfare loss, to the revealed choice.

Date: 2015
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Related works:
Working Paper: A Measure of Rationality and Welfare (2015)
Working Paper: A Measure of Rationality and Welfare (2014)
Working Paper: A measure of rationality and welfare (2014)
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