Dalton, Patricio S. and Ghosal, Sayantan (2010) Behavioural decisions & welfare. Working Paper. Coventry: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2010 (Number 6).
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Abstract
If decision-makers (DMs) do not always do what is in their best interest, what do choices reveal about welfare? This paper shows how observed choices can reveal whether the DM is acting in her own best interest. We study a framework that relaxes rationality in a way that is common across a variety of seemingly disconnected positive behavioral models and admits the standard rational choice model as a special case. We model
a behavioral DM (boundedly rational) who, in contrast to a standard DM (rational), does not fully internalize all the consequences of her own actions on herself. We provide
an axiomatic characterization of choice correspondences consistent with behavioral and standard DMs, propose a choice experiment to infer the divergence between choice and
welfare, state an existence result for incomplete preferences and show that the choices of behavioral DMs are, typically, sub-optimal.
| Item Type: | Working or Discussion Paper (Working Paper) |
|---|---|
| Alternative Title: | Behavioural decisions and welfare |
| Subjects: | H Social Sciences > HB Economic Theory Q Science > QA Mathematics |
| Divisions: | Faculty of Social Sciences > Economics |
| Library of Congress Subject Headings (LCSH): | Normative economics -- Mathematical models, Welfare economics -- Mathematical models, Economic policy -- Mathematical models, Decision making -- Mathematical models |
| Series Name: | CAGE Online Working Paper Series |
| Publisher: | Department of Economics, University of Warwick |
| Place of Publication: | Coventry |
| Official Date: | 21 December 2010 |
| Dates: | Date Event 21 December 2010 Published |
| Volume: | Volume 2010 |
| Number: | Number 6 |
| Number of Pages: | 37 |
| Status: | Not Peer Reviewed |
| Publication Status: | Published |
| Access rights to Published version: | Open Access (Creative Commons open licence) |
| Description: | This is revised version of a working paper. |
| Date of first compliant deposit: | 1 August 2016 |
| Date of first compliant Open Access: | 1 August 2016 |
| Funder: | Royal Economic Society (Great Britain) (RES), Marie Curie Early Stage Research Training Fellowship (EST), University of Warwick. Dept. of Economics, Economic and Social Research Council (Great Britain) (ESRC) , Great Britain. Dept. for International Development |
| Grant number: | RES-167-25-0364 (ESRC-DFID) |
| Related URLs: | |
| URI: | https://wrap.warwick.ac.uk/53976/ |
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