Behavioral Decisions and Policy

CentER Discussion Paper Series No. 2010-125

28 Pages Posted: 10 Jan 2011 Last revised: 24 Jun 2013

See all articles by Patricio S. Dalton

Patricio S. Dalton

Tilburg University - Center for Economic Research (CentER)

Sayantan Ghosal

University of Glasgow - Adam Smith Business School

Date Written: November 1, 2010

Abstract

We study the public policy implications of a model in which agents do not fully internalize all the conscequences of their actions. Such a model unifies seemingly disconected models with behavioral agents. We evaluate the scope of paternalistic and libertarian-parternalistic policies in the light of our model, and propose an alternative type of approach, called soft-libertarian, which guides the decision makers in the internalization of all the conscequences of their actions. Psychotherapy is one example of a soft-libertarian policy. Moreover, we show that in our behavioral framework, policies that increase the set of opportunities or provide more information to the agent may not longer be individual welfare improving.

Keywords: Behavioral Decisions, Revealed Preferences, Normative Preferences, Paternalism, Soft-Libertarian, Autonomy, Psychotherapy

JEL Classification: D03, D60, I30

Suggested Citation

Dalton, Patricio S. and Ghosal, Sayantan, Behavioral Decisions and Policy (November 1, 2010). CentER Discussion Paper Series No. 2010-125. Available at SSRN: https://ssrn.com/abstract=1736567 or http://dx.doi.org/10.2139/ssrn.1736567

Patricio S. Dalton (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Sayantan Ghosal

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

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