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Title: Revealed Preference Analysis with Framing Effects

Author(s): Jacob Goldin and Daniel Reck

Publication Date: October 2018

Keyword(s): Behavioral economics, behavioral welfare analysis, framing effects and revealed preferences

Programme Area(s): Public Economics

Abstract: In many settings, decision-makers' behavior is observed to vary based on 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 understand- ing 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.

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Bibliographic Reference

Goldin, J and Reck, D. 2018. 'Revealed Preference Analysis with Framing Effects'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13232