Cognitive Ability and Paternalism

Arbeitspapier

This paper analyses the welfare effects of price restrictions on private contracting in a world where agents have a limited cognitive ability. People compute the costs and benefits of entering a transaction with an error. The government knows the distribution of true costs and benefits as well as that of errors. By imposing constraints on transaction prices, the government eliminates some that are on average inefficient--because the price signals that one of the parties has typically grossly overestimated its benefit from participation. This policy may increase aggregate welfare even though some of the transactions being blocked are actually efficient. The paper also studies the extent to which the use of private consultants with sufficient intelligence by people with limited intelligence may dominate government regulation.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 609

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Energy, Environmental, Health, and Safety Law ; Labor Law ; Monopsony; Segmented Labor Markets ; Labor Contracts ; Wages, Compensation, and Labor Costs: Public Policy ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Asymmetric and Private Information; Mechanism Design ; Criteria for Decision-Making under Risk and Uncertainty
• Thema: cognitive ability ; minimum wages ; regulation ; price controls ; paternalism ; intelligence ; Preisaufsicht ; Rationales Verhalten ; Beschränkte Rationalität ; Kognition ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Saint-Paul, Gilles
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2002

Weitere Informationen

• Handle: http://hdl.handle.net/10419/21277
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ