Revealed Preference Analysis with Framing Effects

40 Pages Posted: 31 Mar 2014 Last revised: 7 Oct 2018

See all articles by Jacob Goldin

Jacob Goldin

Stanford Law School

Daniel Reck

London School of Economics & Political Science (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2018

Abstract

In many settings, decision-makers' behavior is observed to vary based on seemingly arbitrary factors. Such framing effects cast doubt on the welfare conclusions drawn from revealed preference analysis. We relax the assumptions underlying that approach to accommodate settings in which framing effects are present. Plausible restrictions of varying strength permit either partial- or point-identification of preferences for the decision-makers who choose consistently across frames. Recovering population preferences requires understanding the empirical relationship between decision-makers’ preferences and their sensitivity to the frame. We develop tools for studying this relationship and illustrate them with data on automatic enrollment into pension plans.

Keywords: Revealed preferences; framing effects; behavioral economics; behavioral welfare analysis

JEL Classification: C10, D60, I30

Suggested Citation

Goldin, Jacob and Reck, Daniel, Revealed Preference Analysis with Framing Effects (October 1, 2018). Available at SSRN: https://ssrn.com/abstract=2417709 or http://dx.doi.org/10.2139/ssrn.2417709

Jacob Goldin

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

Daniel Reck (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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