Revealed Preference Analysis with Framing Effects

Details

Author(s):
  • Jacob Goldin
  • Daniel Reck
Publish Date:
June 4, 2020
Publication Title:
Journal of Political Economy
Format:
Journal Article Volume 128 Issue 7 Page(s) 2759-2795
Citation(s):
  • Jacob Goldin & Daniel Reck, Revealed Preference Analysis with Framing Effects, 128 Journal of Political Economy 2759 (2020).

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.