Investment Business Weekly
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Economics and Behavior and Organization
Reports Outline Economics and Behavior and Organization Study Findings from Utah State University
June 19th, 2011
According to a study from Logan, United States, "Contrary to the usual presumption that welfare in markets is maximized if consumers behave rationally, we show in a two-period overlapping generations model that there always exists an irrational consumption rule that can weakly improve upon the lifecycle/permanent-income rule in general equilibrium. The market-clearing mechanism introduces a pecuniary externality that individual rational households do not consider when making decisions but a publically shared rule of thumb can exploit." "For typical calibrations, the improvement of the welfare of irrational households is robust to the introduction of rational agents....
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Source: Investment Business Weekly (2011-06-19)
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