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Behavioral Welfare Economics and Risk Preferences: A Bayesian Approach / Xiaoxue Sherry Gao, Glenn W. Harrison, Rusty Tchernis.
- Format:
- Book
- Author/Creator:
- Gao, Xiaoxue Sherry.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27685.
- NBER working paper series no. w27685
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- We propose the use of Bayesian estimation of risk preferences of individuals for applications of behavioral welfare economics to evaluate observed choices that involve risk. Bayesian estimation provides more systematic control of the use of informative priors over inferences about risk preferences for each individual in a sample. We demonstrate that these methods make a difference to the rigorous normative evaluation of decisions in a case study of insurance purchases. We also show that hierarchical Bayesian methods can be used to infer welfare reliably and efficiently even with significantly reduced demands on the number of choices that each subject has to make. Finally, we illustrate the natural use of Bayesian methods in the adaptive evaluation of welfare.
- Notes:
- Print version record
- August 2020.
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