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Choice and individual welfare

Chambers, Christopher P. and Hayashi, Takashi (2008) Choice and individual welfare. Social Science Working Paper, 1286. California Institute of Technology , Pasadena, CA.

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We propose an abstract method of systematically assigning a “rational” ranking of outcomes to choice data which may not be rationalizable in any sense. An individual welfare functional maps stochastic choice functions into weak orders. A stochastic choice function gives the empirical frequency of choices for any possible opportunity set (framing factors may also be incorporated into the model); we call such general choice functions “choice distributions.” We require that for any two alternatives x and y, if our individual welfare functional recommends x over y given two distinct choice distributions, then it also recommends x over y for any mixture of the two choice distributions. Together with some mild technical requirements, such an individual welfare functional must weight every opportunity set and assign a utility to each alternative x which is the sum across all opportunity sets of the weighted probability of x being chosen from the set. It therefore requires us to have a “prior view” about how important a choice of x from a given opportunity set is.

Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription ItemLater version published in Journal of Economic Theory
Chambers, Christopher P.0000-0001-8253-0328
Additional Information:We would like to thank Colin Camerer, Jeff Ely, and Matt Rabin for helpful discussions and comments. All errors are our own. Published as Chambers, C. P., & Hayashi, T. (2012). Choice and individual welfare. Journal of economic theory, 147(5), 1818-1849.
Group:Social Science Working Papers
Subject Keywords:behavioral economics, welfare economics, axiomatic approach, choice theory
Series Name:Social Science Working Paper
Issue or Number:1286
Classification Code:JEL: D60
Record Number:CaltechAUTHORS:20170728-135604147
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79547
Deposited By: Jacquelyn Bussone
Deposited On:02 Aug 2017 18:51
Last Modified:09 Mar 2020 13:18

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