Spiegler, R.; (2006) On two points of view regarding revealed preferences and behavioral economics. (ELSE Working Papers 223). ESRC Centre for Economic Learning and Social Evolution: London, UK.

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Abstract

Non-standard decision models are often inconsistent with a narrow version of the revealed preference principle, according to which 'utility maximization and observed choice are synonymous'. One possible response to this state of a¤airs is that the revealed preference principle is irrelevant if it conflicts with a model in which the theorist puts a lot of faith thanks to psychological evidence. Another response is that the narrow version of the principle should be retained and used as a criterion for evaluating decision models. I discuss these two points of view, using as a template two well-known classes of decision models. The first point of view is examined in light of a class of models in which the decision maker's subjective belief is a carrier of utility. The second point of view is discussed in the context of Gul and Pesendorfer's model of self-control preferences.

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