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Revealed-preference analysis with framing effects

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  • Goldin, Jacob
  • Reck, Daniel

Abstract

In many settings, decision makers’ behavior is observed to vary on the basis of seemingly arbitrary factors. Such framing effects cast doubt on the welfare conclusions drawn from revealed-preference analysis. We relax the assumptions underlying that approach to accommodate settings in which framing effects are present. Plausible restrictions of varying strength permit either partial or point identification of preferences for the decision makers who choose consistently across frames. Recovering population preferences requires understanding the empirical relationship between decision makers’ preferences and their sensitivity to the frame. We develop tools for studying this relationship and illustrate them with data on automatic enrollment into pension plans.

Suggested Citation

  • Goldin, Jacob & Reck, Daniel, 2020. "Revealed-preference analysis with framing effects," LSE Research Online Documents on Economics 101443, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:101443
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    File URL: http://eprints.lse.ac.uk/101443/
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    References listed on IDEAS

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    Cited by:

    1. Goldin, Jacob & Homonoff, Tatiana & Patterson, Richard & Skimmyhorn, William, 2020. "How much to save? Decision costs and retirement plan participation," Journal of Public Economics, Elsevier, vol. 191(C).
    2. Gächter, Simon & Kölle, Felix & Quercia, Simone, 2022. "Preferences and perceptions in Provision and Maintenance public goods," Games and Economic Behavior, Elsevier, vol. 135(C), pages 338-355.
    3. Guy Barokas & Burak Ünveren, 2022. "Impressionable Rational Choice: Revealed-Preference Theory with Framing Effects," Mathematics, MDPI, vol. 10(23), pages 1-19, November.
    4. Daniel Reck & Arthur Seibold, 2023. "The Welfare Economics of Reference Dependence," CRC TR 224 Discussion Paper Series crctr224_2023_450, University of Bonn and University of Mannheim, Germany.

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    More about this item

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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