Utility Theory

    At the Institute, we're expanding the way economists think about human welfare.
    By exploring the philosophical and psychological foundations of Utility Theory, we can better understand human happiness and behavior.

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    A sparsity based model of bounded rationality

    A more realistic version of how people “maximize utility” Read more

    The Theory of the Firm: Language, Model and Reality

    In a previous post we queried whether the theory of the consumer as developed in the first three chapters of Mas-Colell, Whinston and Green (and indeed other comparable texts) provides anything by way of content beyond what is implied by the abstract description of consumers as agents who are maximizing something. [We did not discuss chapter four, on aggregation of demand, to which we may return later]. As we noted then, a comparable point can be made about the theory of the firm. Read more