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A model of state aggregation

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  • Anastasia Burkovskaya

    (University of Sydney)

Abstract

In this paper, due to limited attention and lack of focus, an agent has tendency toward framing of available information that drives her to see the state space as a collection of the events or “small worlds” related to a particular ambience, which we call a state aggregation. This work axiomatizes the model of state aggregation, shows how to recover the structure of the “small worlds” together with beliefs and utility from the individual demand for assets, and provides comparative statics and revealed preference restrictions.

Suggested Citation

  • Anastasia Burkovskaya, 2022. "A model of state aggregation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 121-149, February.
    • Handle: RePEc:spr:joecth:v:73:y:2022:i:1:d:10.1007_s00199-020-01326-5
    DOI: 10.1007/s00199-020-01326-5
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    More about this item

    Keywords

    Limited attention; Lack of focus; Framing; Identification; State aggregation;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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