Final published version, 861 KB, PDF document
Research output: Working paper
Research output: Working paper
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TY - UNPB
T1 - Predictive Power in Behavioral Welfare Economics
AU - Bouacida, Elias
AU - Martin, Daniel
PY - 2020/3/1
Y1 - 2020/3/1
N2 - When choices are inconsistent due to behavioral biases, there is a theoretical debate about whether the structure of a model is necessary for providing precise welfare guidance based on those choices. To address this question empirically, we use standard data sets from the lab and field to evaluate the predictive power of two “model-free” approaches to behavioral welfare analysis. We find they typically have high predictive power, which means there is little ambiguity about what should be selected from each choice set. We also identify properties of revealed preferences that help to explain the predictive power of these approaches.
AB - When choices are inconsistent due to behavioral biases, there is a theoretical debate about whether the structure of a model is necessary for providing precise welfare guidance based on those choices. To address this question empirically, we use standard data sets from the lab and field to evaluate the predictive power of two “model-free” approaches to behavioral welfare analysis. We find they typically have high predictive power, which means there is little ambiguity about what should be selected from each choice set. We also identify properties of revealed preferences that help to explain the predictive power of these approaches.
KW - Welfare economics
KW - behavioral economics
KW - predictive power
KW - revealed preferences
M3 - Working paper
T3 - Economics Working Papers Series
BT - Predictive Power in Behavioral Welfare Economics
PB - Lancaster University, Department of Economics
CY - Lancaster
ER -