@techreport{40475d1b949d475c8554a3cf787f9823,
title = "Deciphering the Noise: The Welfare Costs of Noisy Behavior",
abstract = "Theoretical work on stochastic choice mainly focuses on the sources of choice ran- domness, and less on its economic consequences. We attempt to close this gap by developing a method of extracting information about the monetary costs of noise from structural estimates of preferences and choice randomness. Our method is based on allowing a degree of noise in choices in order to rationalize them by a given structural model. To illustrate the approach, we consider risky binary choices made by a sample of the general Danish population in an artefactual eld experiment. The estimated welfare costs are small in terms of everyday economic activity, but they are consider- able in terms of the actual stakes of the choice environment. Higher welfare costs are associated with higher age, lower education, and lower income.",
keywords = "Stochastic choice, Choice under risk, Welfare costs, Behavioral welfare economics, Stochastic choice, Choice under risk, Welfare costs, Behavioral welfare economics",
author = "Aleksandr Alekseev and Harrison, {Glenn W.} and Morten Lau and Don Ross",
year = "2018",
month = mar,
language = "English",
series = "Working paper / Center for Economic Analysis of Risk (CEAR)",
publisher = "CEAR, Georgia State University",
number = "2018-01",
type = "WorkingPaper",
institution = "CEAR, Georgia State University",
}