This paper examines the measurement of social welfare, poverty and inequality taking into account reference-dependence, loss aversion and diminishing sensitivity — aspects emphasized in Prospect Theory — to social welfare measurement. We suggest a new notion of equivalent income, the income...

This paper examines the measurement of social welfare, poverty and inequality taking into account features that have been found to be important welfare determinants in behavioural economics. Most notably, we incorporate reference-dependence, loss aversion and diminishing sensitivity — aspects...

In the last two decades, questioning of the textbook model of individual choice behavior has accelerated. 'Imperfections' of individual choice behavior are increasingly accepted by the profession as viable empirical phenomena to be explained and incorporated. Non-standard objectives and decision...

The standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximise expected utility. However, prospect theory has now been established as an alternative model of individual behaviour, with empirical support. This paper explores the...

This paper examines the measurement of social welfare, poverty and inequality taking into account features that have been found to be important welfare determinants in behavioural economics. Most notably, we incorporate reference-dependence, loss aversion and diminishing sensitivity — aspects...

This paper examines the measurement of social welfare, poverty and inequality taking into account reference-dependence, loss aversion and diminishing sensitivity — aspects emphasized in Prospect Theory — to social welfare measurement. We suggest a new notion of equivalent income, the income...

Research in behavioral economics has uncovered the widespread phenomenon of people making decisions against their own good intentions. In these situations, the government might want to intervene, indeed individuals might want the government to intervene, to induce behavior that is closer to what...

The standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximize expected utility. However, prospect theory has now been established as an alternative model of individual behaviour, with empirical support. This paper explores the...