We propose a broad generalization of standard choice-theoretic welfare economics that encompasses a wide variety of non-standard behavioral models. Our approach exploits the coherent aspects of choice which those positive models typically attempt to capture. It replaces the standard revealed preference relation with an unambiguous choice relation: roughly, x is (strictly) unambiguously chosen over y (written xP*y) if y is never chosen when x is available. Under weak assumptions, P* is acyclic and therefore suitable for welfare analysis; it is also the most discerning welfare criterion that never overrules choice. The resulting framework generates natural counterparts for the standard tools of applied welfare economics, and is easily applied in the context of specific behavioral theories, with novel implications. Though not universally discerning, it lends itself to principled refinements.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13737.
Length: Date of creation: Jan 2008 Date of revision: Handle: RePEc:nbr:nberwo:13737
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Find related papers by JEL classification: D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles D60 - Microeconomics - - Welfare Economics - - - General H40 - Public Economics - - Publicly Provided Goods - - - General
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Walter Bossert & Yves Sprumont & Kotaro Suzumura, 2005.
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Bossert, W. & Sprumont, Y. & Suzumura, K., 2002.
"Consistent Rationalizability,"
Cahiers de recherche
12-2002, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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Bossert, Walter & Sprumont, Yves & Suzumura, Kotaro, 2002.
"Consistent Rationalizability,"
Discussion Paper
82, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
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BOSSERT, Walter & SPRUMONT, Yves & SUZUMURA, Kotaro, 2002.
"Consistent Rationalizability,"
Cahiers de recherche
2002-12, Universite de Montreal, Departement de sciences economiques.
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Ted O'Donoghue & Matthew Rabin, 1999.
"Doing It Now or Later,"
American Economic Review,
American Economic Association, vol. 89(1), pages 103-124, March.
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Chambers, Christopher P. & Hayashi, Takashi, 2008.
"Choice and individual welfare,"
Working Papers
1286, California Institute of Technology, Division of the Humanities and Social Sciences.
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