Xavier Gabaix

Professor of Finance

My research focuses on behavioral economics, finance and macroeconomics. These days I am working particularly on developing basic modeling tools for behavioral economics.I’m developing a sparse matrix, that generalizes the usual maximization operator used everywhere in economics. The agent builds (as economists do) a simplified model of the world which is sparse, considering only the variables of first-order importance, and ignoring the others. His stylized model and his resulting choices both derive from constrained optimization. Still, the sparse max remains tractable to compute. Moreover, the induced outcomes reflect basic psychological forces governing limited attention. With the sparse max, we can explore how a variety of economic models change when agents are less than fully rational: we obtain a behavioral / sparse version consumer theory, equilibrium theory (two basic chapters of the microeconomic textbooks), dynamic programming and macro. The medium-run goal is to have a tractable, reasonably unified framework to revisit some basic parts of economics, and psychologically enrich them.

SHARE