How Are Preferences Revealed?

John  Beshears; James J. Choi; David  Laibson; Brigitte C. Madrian

Article | Journal of Public Economics | June 2008

How Are Preferences Revealed?

by John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian

Abstract

Revealed preferences are tastes that rationalize an economic agent's observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third-party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes.

Keywords: Consumer Behavior; Attitudes; Microeconomics;

Format: Print

Find at Harvard Read Now Purchase

Citation:

Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "How Are Preferences Revealed?" Journal of Public Economics 92, nos. 8-9 (June 2008): 1787–1794.

In 2016, members of the U.S. Women's National Soccer Team (WNT) took steps to fight for equal pay relative to the U.S. Men's National Soccer Team. Their legal representative declared that the memorandum of understanding governing the relationship between the players and the U.S. Soccer Federation (USSF) was terminable at will. If a court agreed with this position, the players could threaten to strike in advance of the upcoming Olympics. In addition, five of the top WNT players filed a wage-discrimination complaint against the USSF with the Equal Employment Opportunity Commission. This case describes the history of the WNT and the USSF leading up to these events.

In 2016, members of the U.S. Women's National Soccer Team (WNT) took steps to fight for equal pay relative to the U.S. Men's National Soccer Team. Their legal representative declared that the memorandum of understanding governing the relationship between the players and the U.S. Soccer Federation (USSF) was terminable at will. If a court agreed with this position, the players could threaten to strike in advance of the upcoming Olympics. In addition, five of the top WNT players filed a wage-discrimination complaint against the USSF with the Equal Employment Opportunity Commission. This case describes the events following from the actions of the WNT players.

Fresh out of a public social media debacle, Gary Vaynerchuk needs to reconsider the approach he takes in leading his digital media agency, VaynerMedia. Founded in 2009 by Gary and his brother AJ, VaynerMedia has grown into an unconventional creative marketing agency. With notable clients and a savvy and personable approach to maintaining attention arbitrage, the future looks bright with Gary at the helm of VaynerMedia. Or does it? This case explores Vaynerchuk’s strengths and weaknesses, VaynerMedia’s successes and challenges, and the overall command of the marketing firm as it continues to grow and evolve in an ever-changing digital media landscape. Ultimately, the case highlights a tension many ventures face as they mature from initial founding to growth sustainability: should the visionary CEO continue leading the charge forward, or should he consider stepping aside and allowing his firm to lead its own way forward?

Faculty & Research

How Are Preferences Revealed?

Abstract

Citation:

About the Author

More from the Author