Eliciting Welfare Preferences from Behavioral Datasets

A behavioral dataset contains various preference orderings displayed by the same individual in different payoff-irrelevant circumstances. We introduce a framework for eliciting the individual’s underlying preferences in such cases, in which it is conjectured that the variation in the observed preference orderings is the outcome of some cognitive process that distorts the underlying preferences. We then demonstrate for two cognitive processes how to elicit the individual’s underlying preferences from behavioral datasets. ∗We thank Ayala Arad, Doug Bernheim, Eddie Dekel, Daniel Hojman, Tim Feddersen, Drew Fudenberg, Yusufcan Masatlioglu, Meg Meyer, Ron Siegel, Ran Spiegler, Rakesh Vohra and seminar participants at Boston University, Hebrew University, Northwestern University, University of British Columbia, the Summer School on Welfare Economics and Philosophy at San-Sebastian (Spain, July 2009) and the European Summer Symposium in Economic Theory at Gerzensee (Switzerland, July 2010) for their comments. †Rubinstein: University of Tel Aviv Cafés, Tel Aviv University, and New York University. Salant: Northwestern University.