Decisions with endogenous frames

We develop a model of decision-making with endogenous frames and contrast the normative implications of our model to those of choice theoretic models in which observed choices are determined by exogenous frames or ancillary conditions. We argue that, frames, though they may be taken as given by the decision-maker at the point when choices are made, matter for both welfare and policy purposes.

An earlier version of this paper has been circulated as a CentER Research paper 2010-21 with the name “Decisions with Endogenous Preference Parameters”. This paper was prepared for a special issue of Social Choice and Welfare on Reconciling Normative and Behavioural Economics, edited by Ben McQuillin, Robert Sugden and Marc Fleurbaey. It constitutes a short and selective version of the paper presented at the University of East Anglia Conference on Reconciling Normative and Behavioural Economics on April 2008. We are indebted to Fleurbaey, McQuillin, Sugden and two anonymous referees for their comments that have immensely improved the paper. Both authors acknowledge support from ESRC-DFID grant RES-167-25-0364.