Revealed Preference in a Discrete Consumption Space
AbstractWe show that an agent maximizing some utility function on a discrete (as opposed to continuous) consumption space will obey the generalized axiom of revealed preference (GARP), so long as the agent obeys cost efficiency. Cost efficiency will hold if there is some good, outside the set of goods being studied by the modeler, that can be consumed by the agent in continuous quantities. An application of Afriat's Theorem then guarantees that there is a strictly increasing utility function on the discrete consumption space that rationalizes price and demand observations. (JEL D11)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Microeconomics.
Volume (Year): 5 (2013)
Issue (Month): 1 (February)
Other versions of this item:
- Matthew Polisson & John Quah, 2012. "Revealed Preference in a Discrete Consumption Space," Discussion Papers in Economics 12/02, Department of Economics, University of Leicester, revised Feb 2012.
- Matthew Polisson & John Quah, 2012. "Revealed preference in a discrete consumption space," IFS Working Papers W12/03, Institute for Fiscal Studies.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Matthew Polisson, 2011.
"Goods Versus Characteristics: Dimension Reduction and Revealed Preference,"
Discussion Papers in Economics
11/44, Department of Economics, University of Leicester, revised Dec 2011.
- Matthew Polisson, 2011. "Goods Versus Characteristics: Revealed Preference Procedures for Nested Models," Economics Series Working Papers 531, University of Oxford, Department of Economics.
- Matthew Polisson, 2012. "Goods versus characteristics: dimension reduction and revealed preference," IFS Working Papers W12/02, Institute for Fiscal Studies.
- Francoise Forges & Vincent Iehlé, 2013.
"Afriat's Theorem for Indivisible Goods,"
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