What You Don't Know May Hurt You: A Revealed Preferences Approach

34 Pages Posted: 9 Nov 2023 Last revised: 7 Dec 2023

See all articles by Gonzalo Arrieta

Gonzalo Arrieta

Stanford University

Lukas Bolte

Carnegie Mellon University

Date Written: October 26, 2023

Abstract

The dominant approach to welfare is based on revealed preferences and thus is restricted to settings where the individual knows their preferences have been fulfilled. We use a choosing-for-others framework to experimentally study welfare when what the individual believes to be true differs from what is actually true. We find substantial heterogeneity. About 40% of participants see welfare as independent of beliefs; 10% see welfare impact only via beliefs; and 50% exhibit mixed behavior. Our results suggest most people support the idea that welfare goes beyond awareness, which may inform media regulation, informational policies, and government communication.

Keywords: Welfare, paternalism, revealed preferences, utilitarianism, mental states, beliefs, information policy, experience machine

JEL Classification: C91, D01, D60, I31, I38

Suggested Citation

Arrieta, Gonzalo and Bolte, Lukas, What You Don't Know May Hurt You: A Revealed Preferences Approach (October 26, 2023). Available at SSRN: https://ssrn.com/abstract=4614217 or http://dx.doi.org/10.2139/ssrn.4614217

Gonzalo Arrieta

Stanford University ( email )

Stanford, CA 94305
United States

Lukas Bolte (Contact Author)

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

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