NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics

B. Douglas Bernheim, Antonio Rangel

NBER Working Paper No. 13737
Issued in January 2008
NBER Program(s):   PE

We propose a broad generalization of standard choice-theoretic welfare economics that encompasses a wide variety of non-standard behavioral models. Our approach exploits the coherent aspects of choice which those positive models typically attempt to capture. It replaces the standard revealed preference relation with an unambiguous choice relation: roughly, x is (strictly) unambiguously chosen over y (written xP*y) if y is never chosen when x is available. Under weak assumptions, P* is acyclic and therefore suitable for welfare analysis; it is also the most discerning welfare criterion that never overrules choice. The resulting framework generates natural counterparts for the standard tools of applied welfare economics, and is easily applied in the context of specific behavioral theories, with novel implications. Though not universally discerning, it lends itself to principled refinements.

download in pdf format
   (382 K)

email paper

This paper is available as PDF (382 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13737

Published: B. Douglas Bernheim & Antonio Rangel, 2009. "Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 51-104, February.

Users who downloaded this paper also downloaded these:
Bernheim and Rangel w11518 Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers
Bernheim w14622 Behavioral Welfare Economics
Bernheim w13954 On the Potential of Neuroeconomics: A Critical (but Hopeful) Appraisal
Bayer, Bernheim, and Scholz w5655 The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers
Beshears, Choi, Laibson, and Madrian w13976 How are Preferences Revealed?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us