Money Pumps and Bounded Rationality
Theoretical Economics
2024-04-09 v1
Abstract
The standard criterion of rationality in economics is the maximization of a utility function that is stable across multiple observations of an agent's choice behavior. In this paper, we discuss two notions of the money pump that characterize two corresponding notions of utility-maximization. We explain the senses in which the amount of money that can be pumped from a consumer is a useful measure of the consumer's departure from utility-maximization.
Keywords
Cite
@article{arxiv.2404.04843,
title = {Money Pumps and Bounded Rationality},
author = {Joshua Lanier and Matthew Polisson and John K. -H. Quah},
journal= {arXiv preprint arXiv:2404.04843},
year = {2024}
}