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Behavioral Incentive Compatibility and Empirically Informed Welfare Analysis: An Introductory Guide

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  • Alex Rees-Jones

Abstract

A growing body of research conducts welfare analysis that assumes behavioral incentive compatibility—that is, that behavior is governed by pursuit of incentives conditional on modeled imperfections in decision-making. In this article, I present several successful examples of studies that apply this approach and I use them to illustrate guidance for pursuing this type of analysis.

Suggested Citation

  • Alex Rees-Jones, 2024. "Behavioral Incentive Compatibility and Empirically Informed Welfare Analysis: An Introductory Guide," Journal of Economic Perspectives, American Economic Association, vol. 38(4), pages 155-174, Fall.
    • Handle: RePEc:aea:jecper:v:38:y:2024:i:4:p:155-74
    DOI: 10.1257/jep.38.4.155
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    More about this item

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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