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A Measure of Rationality and Welfare

Author

Listed:
  • Jose Apesteguia
  • Miguel Ángel Ballester

Abstract

Evidence showing that individual behavior often deviates from the classical principle of preference maximization has raised at least two important questions: (i) How serious are the deviations? and (ii) What is the best way to analyse choice behavior in order to extract information for the purpose of welfare analysis? This paper addresses these questions by proposing a new way to identify the preference relation which is closest, in terms of welfare loss, to the revealed choice.

Suggested Citation

  • Jose Apesteguia & Miguel Ángel Ballester, 2014. "A Measure of Rationality and Welfare," Working Papers 573, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:573
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    References listed on IDEAS

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    More about this item

    Keywords

    Revealed Preference;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D60 - Microeconomics - - Welfare Economics - - - General

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    This paper has been announced in the following NEP Reports:

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