🤖 AI Summary
This study challenges the traditional economic assumption of fully rational consumers by modeling them as information processors constrained by finite channel capacity, where choices are represented as probability distributions over consumption bundles rather than deterministic selections. Integrating utility maximization with an information-theoretic framework, the paper introduces an attention-constrained information compression mechanism and derives a closed-form solution for demand responses. The model demonstrates that price effects on demand arise jointly from budget constraints and information compression: in the zero-attention limit, behavior collapses to habitual choice, while infinite attention recovers Walrasian demand. Theoretical analysis establishes symmetry of the demand-price response matrix and proves that own-price demand decreases under tight budget constraints. Full analytical solutions are obtained for the case of quadratic utility with two goods.
📝 Abstract
Standard economics assumes the consumer as a flawless calculator who always buys the best basket it can afford. This paper models the shopper instead as a limited information channel: it compresses its world to the detail its attention affords, so its choice is a probability distribution, not a single basket. The textbook consumer returns exactly as the unlimited-attention limit, while at the zero-attention end the shopper falls back on pure habit. The central result is about how this shopper's demand responds to price changes. That pattern of responses is just a rescaling of how the shopper's own choices vary and move together, so it comes out symmetric. And provided the budget really binds, because the shopper wants more than it can afford, raising a good's own price lowers demand for it once buying power is held fixed. So the downward pull comes from the budget and from compression, not from rationality. The framework also covers an artificial agent running a limited-capacity policy. A worked two-good quadratic consumer carries every quantity in closed form.