Error message

Deprecated function: Array and string offset access syntax with curly braces is deprecated in include_once() (line 20 of /mnt/web104/a0/07/510451407/htdocs/includes/file.phar.inc).

Self-fulfilling Mistakes: Characterization and Welfare

Printer-friendly version
Article
Author/s: 
Patricio S. Dalton, Sayantan Ghosal
The Economic Journal
Publisher: 
Wiley
Year: 
2016
This paper incorporates self-fulfilling mistakes into an otherwise classical decision-making framework. A behavioural agent makes a mistake when he fails to internalize all the consequences of his actions on himself. We show that Sen's axioms α and γ fully characterize choice data consistent with behavioral agents. These two axioms are weaker than Sen's axioms α and β that fully characterize rational agents. We offer a welfare benchmark that can be applied to existing behavioural economics models and show the conditions under which our welfare ranking can be used to infer welfare dominated (i.e. mistaken) choices using choice data alone.
Developed by Paolo Gittoi