On the Identification of Changing Tastes
24 Pages Posted: 4 Feb 2019 Last revised: 14 May 2019
Date Written: January 21, 2019
In a dynamic choice environment, an agent's tastes may change over time (e.g., due to present bias, habit formation, or reference dependence). These changes are often systematic with important welfare and policy implications. In this paper, we propose a framework to identify an agent's anticipation about how her preferences change over time and provide a heuristic measure that can inform the design of economic policies. In particular, our method resolves identification issues arising in the previous literature by using the intuitive idea that, while tastes can change, rankings are often monotone with respect to a suitable dominance relation.
Keywords: changing tastes, consistent planning, dynamic choice, dominance relation
JEL Classification: D11, D15, D91
Suggested Citation: Suggested Citation