Relaxed Optimization: How Close Is a Consumer to Satisfying First-Order Conditions?

• 成果类型: Article
• 署名作者: de Clippel, Geoffroy; Rozen, Kareen
• 署名单位: Brown University
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest_a_01088
• 发表日期: 2023-07
• 页码: 883-898
• 关键词: rationality; CHOICE; MODEL

摘要

We propose relaxing the first-order conditions in optimization to approximate rational consumer choice. We assess the magnitude of departures with a new, axiomatically founded measure that admits multiple interpretations. Standard inequality tests of rationality for any given reference class of preferences can be conveniently repurposed to measure goodness-of-fit with that class. Another advantage of our approach is that it is applicable in any context where the first-order approach is meaningful (e.g., convex budget sets arising from progressive taxation). We apply these ideas to shed new light on existing portfolio-choice data.