Consumer Theory with Misperceived Tastes
31 Pages Posted: 15 Aug 2018
Date Written: July 30, 2018
Incorporating bounded rationality into the classic consumer theory setting, we study the testable implications of a consumer who may have trouble consistently assessing her subjective tastes. Our model of ε-Rationalizability, which bounds the consumer’s misperception of her marginal rates of substitution, may arise from various choice heuristics. It also offers a natural, preference-based measure of departure from rationality that is more demanding than Afriat’s measure.
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