We introduce a notion of behavioral competitive equilibrium (BCE), to study house-holds' inability to tailor their consumption to the state of the economy. Our notion is motivated by limited cognitive ability (in particular attention, memory, and complexity) and it maintains the complete market...

A behavioral competitive equilibrium restricts households ability to tailor their consumption to the state of the economy. Compared to standard competitive equilibrium, a behavioral competitive equilibrium yields more consumption risk and extreme price volatility when the realized output is near...

We introduce a notion of coarse competitive equilibrium (CCE), to study households' inability to tailor their consumption to the state of the economy. Our notion is motivated by limited cognitive ability (in particular attention, memory, and complexity) and it maintains the complete market...