Revealed Preference Analysis with Framing Effects

Daniel Reck and Jacob Goldin

No 13232, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In many settings, decision-makers’ behavior is observed to vary based on seemingly arbitrary factors. Such framing effects cast doubt on the welfare conclusions drawn from revealed preference analysis. We relax the assumptions underlying that approach to accommodate settings in which framing effects are present. Plausible restrictions of varying strength permit either partial- or point-identification of preferences for the decision-makers who choose consistently across frames. Recovering population preferences requires understand- ing the empirical relationship between decision-makers’ preferences and their sensitivity to the frame. We develop tools for studying this relationship and illustrate them with data on automatic enrollment into pension plans.

Keywords: Revealed preferences; Framing effects; Behavioral economics; Behavioral welfare analysis (search for similar items in EconPapers)
JEL-codes: C10 D60 I30 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-mic and nep-upt
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