Slutsky Matrix Norms and the Size of Bounded Rationality

Given any observed demand behavior by means of a demand function, we quantify by how much it departs from rationality. Using a recent elab- oration of the "almost implies near" principle, the measure of the gap is the smallest norm of the correcting matrix that would yield a Slutsky ma- trix with its standard rationality properties (symmetry, singularity, and negative semideniteness). A useful classication of departures from ra- tionality is suggested as a result. Variants, examples, and applications are discussed, and illustrations are provided using several bounded rationality models.