John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian
NBER Working Paper No. 13976
Issued in May 2008
---- Abridged Abstract -----
Revealed preferences are tastes that rationalize an economic agent’s observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third- party marketing, and intertemporal choice... We illustrate these issues with evidence from savings and investment outcomes.
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