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Rationalizations and mistakes: optimal policy with normative ambiguity

Goldin, Jacob and Reck, Daniel ORCID: 0000-0002-5732-4706 (2018) Rationalizations and mistakes: optimal policy with normative ambiguity. AEA Papers and Proceedings, 108. pp. 98-102. ISSN 2574-0768

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Identification Number: 10.1257/pandp.20181042


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 decision-maker who incurs them or a convenient (but welfare irrelevant) modeling device. We consider how the resolution of this normative ambiguity shapes optimal policy in a number of contexts, including default options, inertia in health plan selection, take-up of social programs, programs that encourage moving to a new neighborhood, and tax salience.

Item Type: Article
Official URL:
Additional Information: © 2018 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
Date Deposited: 13 Jul 2018 09:27
Last Modified: 28 Aug 2021 23:10

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