Download This PaperSatisficing, Aggregation, and Quasilinear Utility
56 Pages Posted: 29 May 2018 Last revised: 28 Apr 2020
Date Written: April 27, 2020
Abstract
This paper takes seriously that the quasilinear utility model is an approximation. We interpret approximation error as arising because individuals are satisficers. We investigate the consequences of individual satisficng for modelling aggregate demand, providing an approximate aggregation theorem. We present a simple method for statistical inference on the minimum approximation error needed to explain aggregate data. In an illustrative application to scanner panel data, we find that all individuals are satisficers yet the data admit an exact representative agent.
Keywords: Revealed Preference, Aggregation, Misspecification, Quasilinear
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