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Dalton, Patricio S. and Ghosal, Sayantan (2008) Decisions with endogenous frames. In: Reconciling Normative and Behavioural Economics, University of East Anglia, Norwich, 3-5 Apr 2008 (Unpublished)
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
We study decision problems where (a) preference parameters are designed to include psychological/moral considerations and (b) there is a feedback effect from chosen actions to preference parameters. In a standard decision problem the chosen action is required to be optimal when the feedback effect from actions to preference parameters is fully taken into account. In a behavioural decision problem the chosen action is optimal taking preference parameters as given although chosen actions and preference parameters are required to be mutually consistent. Our framework unifies seemingly disconnected papers in the literature. We characterize the conditions under which behavioural and standard decisions problems are indistinguishable: in smooth settings, the two decision problems are generically distinguishable. We show that in general, revealed preferences cannot be used for making welfare judgements and we characterize the conditions under which they can inform welfare analysis. We provide an existence result for the case of incomplete preferences. We suggest novel implications for policy and welfare analysis.
| Item Type: | Conference Item (Paper) | ||||
|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HB Economic Theory | ||||
| Divisions: | Faculty of Social Sciences > Economics | ||||
| Official Date: | 5 April 2008 | ||||
| Dates: |
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| Status: | Not Peer Reviewed | ||||
| Publication Status: | Unpublished | ||||
| Funder: | EST Marie Curie Fellowship, Royal Economic Society Junior Fellowship, Warwick Economics Department | ||||
| Version or Related Resource: | Dalton, Patricio S. and Ghosal, Sayantan (2008). Decisions with endogenous frames. In: European Centre for Advanced Research in Economics and Statistics. University of East Anglia, Norwich, 2 Oct 2007. | ||||
| Conference Paper Type: | Paper | ||||
| Title of Event: | Reconciling Normative and Behavioural Economics | ||||
| Type of Event: | Conference | ||||
| Location of Event: | University of East Anglia, Norwich | ||||
| Date(s) of Event: | 3-5 Apr 2008 | ||||
| Related URLs: |
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