How Are Preferences Revealed?

John Leonard Beshears, James Choi, David Laibson and Brigitte Madrian

Scholarly Articles from Harvard University Department of Economics

Abstract: Revealed preferences are tastes that rationalize an economic agent's observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third-party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (149)

Published in Journal of Public Economics

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/11130523/Laibson_Preferences.pdf (application/pdf)

Related works:
Journal Article: How are preferences revealed? (2008)
Working Paper: How are Preferences Revealed? (2008)
Working Paper: How are Preferences Revealed? (2008)
Working Paper: How Are Preferences Revealed? (2007)
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:hrv:faseco:11130523

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().