A model of state aggregation

Anastasia Burkovskaya

Economic Theory, 2022, vol. 73, issue 1, No 4, 149 pages

Abstract: 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.

Keywords: Limited attention; Lack of focus; Framing; Identification; State aggregation (search for similar items in EconPapers)
JEL-codes: D11 D81 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00199-020-01326-5

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