EconPapers    
Economics at your fingertips  
 

Choice, Rationality and Welfare Measurement

Jerry Green and Daniel Hojman

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: We present a method for evaluating the welfare of a decision maker, based on observed choice data. Unlike the standard economic theory of revealed preference, our method can be used whether or not the observed choices are rational. Paralleling the standard theory we present a model for choice such that the observations arise "as if" they were the result of a specific decision making process. However, in place of the usual preference relation whose maximization induces the observations, we explain choice as arising from a compromise among a set of simultaneously held, conflicting preference relations. As in revealed preference theory, these simultaneously held preferences are inferred from the choice data and we use them as the basis to discuss the decision maker’s welfare. In general our method does not yield a unique set of explanatory preferences and therefore we characterize all the explanatory sets of preferences. We use this set to compute bounds on welfare changes. We show that some standard results of rational choice theory can be extended to irrational decision makers. The theory can be used to explore a number of context-dependent choice patterns found in psychological experiments.

JEL-codes: D01 (search for similar items in EconPapers)
Date: 2007-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30) Track citations by RSS feed

Downloads: (external link)
https://research.hks.harvard.edu/publications/work ... ?PubId=5091&type=WPN
Our link check indicates that this URL is bad, the error code is: 500 Server closed connection without sending any data back

Related works:
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: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp07-054

Access Statistics for this paper

More papers in Working Paper Series from Harvard University, John F. Kennedy School of Government Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-12-01
Handle: RePEc:ecl:harjfk:rwp07-054