What You Don't Know May Hurt You: A Revealed Preferences Approach
35 Pages Posted: 9 Nov 2023
Date Written: October 26, 2023
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: Suggested Citation