2018
DOI: 10.1257/pandp.20181042
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Rationalizations and Mistakes: Optimal Policy with Normative Ambiguity

Abstract: Behavior that appears to violate neoclassical assumptions can often be rationalized by incorporating an optimization cost into decision-makers' utility functions. Depending on the setting, these costs may reflect either an actual welfare loss for the decisionmakers who incur them or a convenient (but welfare irrelevant) modeling device. We consider how resolution of this normative ambiguity shapes optimal policy in a number of contexts, including default options, inertia in health insurance plan selection, tak… Show more

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Cited by 2 publications
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References 23 publications
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