A Sparsity-Based Model of Bounded Rationality
Publication information:
Gabaix. A Sparsity-Based Model of Bounded Rationality. Quarterly Journal of Economics. 2014;129(4):1661–1710.
Abstract
I propose a tractable behavioral "max" operator, the sparse max. It yields a behavioral version of basic consumer theory (e.g., Marshallian demand, Slutsky matrix, nominal illusion) and equilibrium theory (e.g., Arrow-Debreu, Edgeworth boxes.)