Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102612
Authors: 
Aguiar, Victor H.
Serrano, Roberto
Year of Publication: 
2014
Series/Report no.: 
Working Paper, Brown University, Department of Economics 2013-16
Abstract: 
Given any observed demand behavior by means of a demand function, we quantify by how much it departs from rationality. Using a recent elaboration of the "almost implies near" principle, the measure of the gap is the smallest norm of the correcting matrix that would yield a Slutsky matrix with its standard rationality properties (symmetry, singularity, and negative semidefiniteness). A useful classification of departures from rationality is suggested as a result. Variants, examples, and applications are discussed, and illustrations are provided using several bounded rationality models.
Subjects: 
consumer theory
rationality
Slutsky matrix
bounded rationality
"almost implies near" principle
JEL: 
C60
D10
Document Type: 
Working Paper

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