How are Preferences Revealed?

John Beshears, James Choi, David Laibson and Brigitte Madrian

No 13976, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: A11 B4 D01 D60 G11 H1 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-dcm, nep-mkt, nep-pbe and nep-upt
Note: AG AP PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (161)

Published as Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2008. "How are preferences revealed?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1787-1794, August.

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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)
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