TY  - JOUR
AU  - Bernheim,B. Douglas
AU  - Rangel,Antonio
TI  - Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13737
PY  - 2008
Y2  - January 2008
UR  - http://www.nber.org/papers/w13737
L1  - http://www.nber.org/papers/w13737.pdf
N1  - Author contact info:
B. Douglas Bernheim
Department of Economics
Stanford University
Stanford, CA 94305-6072
Tel: 650/725-8732
Fax: 650/725-5702
E-Mail: bernheim@stanford.edu

Antonio Rangel
Department of Economics
California Institute of Technology
HSS MC 228-77
Pasadena, CA 91125
Tel: (626) 395-4091
E-Mail: rangel@hss.caltech.edu
AB  - 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.
ER  -