Boundedly rational demand

Evidence suggests that consumers do not perfectly optimize, contrary to a critical assumption of classical consumer theory. We propose a model in which consumer types can vary in both their preferences and their choice behavior. Given data on demand and the distribution of prices, we identify the set of possible values of the consumer surplus based on minimal rationality conditions: every type of consumer must be no worse off than if they either always bought the good or never did. We develop a procedure to narrow the set of surplus values using richer data sets and provide bounds on counterfactual demands.