Anomalies or Expected Behaviors? Understanding Stated Preferences and Welfare Implications in Light of Contemporary Behavioral Economics

Leonhard K. Lades, Ewa Zawojska, Robert Johnston, Nick Hanley, Liam Delaney and Mikolaj Czajkowski

Review of Environmental Economics and Policy, 2025, vol. 19, issue 1, 48 - 68

Abstract: The stated preference (SP) literature contains an expansive body of research on behavioral “anomalies,” typically understood as response patterns that are inconsistent with choice theory in neoclassical economics. Although this literature often implies that anomalous behaviors are unique to SPs, widespread behavioral economic evidence of similar patterns across incentivized choice settings raises the potential for an alternative interpretation: SP “anomalies” reflect expected behaviors once systematic deviations from the standard economic model are considered. The parallels between SP anomalies and insights from behavioral economic revealed preference (RP) studies suggest that differences between SPs and RPs should not determine whether SPs are valid for applied welfare analysis. Moreover, these parallels suggest that behavioral economic approaches to calculating welfare implications of nonstandard behaviors may be applicable to SP studies. We review three such approaches (preference purification, reliance on conditions that encourage truthful preference disclosure, and the Bernheim-Rangel framework) and discuss their potential implications for SP research. We also consider more general insights from behavioral welfare economics for SP welfare analysis. We close by identifying promising avenues for interdisciplinary work at the intersection of SP research and behavioral welfare economics, to develop holistic frameworks with guidance for applied welfare economics in the presence of anomalous yet predictable behaviors.

Date: 2025
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