Rationalizations and mistakes: optimal policy with normative ambiguity
Jacob Goldin and
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
Behavior that appears to violate neoclassical assumptions can often be rationalized by incorporating an optimization cost into decision-makers' utility functions. Depending on the setting, these costs may reflect either an actual welfare loss for the decision-maker who incurs them or a convenient (but welfare irrelevant) modeling device. We consider how the resolution of this normative ambiguity shapes optimal policy in a number of contexts, including default options, inertia in health plan selection, take-up of social programs, programs that encourage moving to a new neighborhood, and tax salience.
JEL-codes: J1 (search for similar items in EconPapers)
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Published in AEA Papers and Proceedings, 1, May, 2018, 108, pp. 98-102. ISSN: 2574-0768
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:89237
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