The Limit of Public Policy: Endogenous Preferences

O. Bar-Gill, C. Fershtman

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In designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy.Public policy may also affect the formation of preferences and norms in a society.The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior.In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good.However this policy triggers an endogenous preference change that results in a lower level of contribution towards the public good despite the explicit monetary incentives to raise that level.
Original languageEnglish
Place of PublicationTilburg
Number of pages27
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper


  • public policy


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