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Predictive Power in Behavioral Welfare Economics

Author

Listed:
  • Elias Bouacida
  • Daniel Martin
Abstract
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.

Suggested Citation

  • Elias Bouacida & Daniel Martin, 2020. "Predictive Power in Behavioral Welfare Economics," Working Papers 296961902, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:296961902
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    File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2020_008.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Khushboo Surana, 2022. "How different are we? Identifying the degree of revealed preference heterogeneity," Discussion Papers 22/09, Department of Economics, University of York.
    2. Elias Bouacida, 2021. "Identifying Choice Correspondences," Working Papers 327800275, Lancaster University Management School, Economics Department.

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    More about this item

    Keywords

    Welfare economics; behavioral economics; predictive power; revealed preferences;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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