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Revealed Preference with Stochastic Demand Correspondence

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  • Dasgupta Indraneel

    ()
    (Durham University)

  • Pattanaik P. K

    ()
    (University of California, Riverside)

Abstract

We extend the revealed preference theory of consumer’s behavior originating in Samuelson’s Weak Axiom of Revealed Preference to simultaneously permit both non-singleton choice sets and random choice. We provide a consistency postulate for demand behavior when such behavior is represented in terms of a stochastic demand correspondence. When the consumer spends his or her entire wealth, our rationality postulate is equivalent to a condition we term “stochastic substitutability.” This equivalence generates as special cases in most of the basic results regarding consumers’ demand behavior in the existing revealed preference literature.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 10 (2010)
Issue (Month): 1 (August)
Pages: 1-21

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Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:35

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  1. Taradas Bandyopadhyay & Indraneel Dasgupta & Prasanta Pattanaik, 2004. "A general revealed preference theorem for stochastic demand behavior," Economic Theory, Springer, vol. 23(3), pages 589-599, March.
  2. Indraneel Dasgupta & Prasanta Pattanaik, 2007. "‘Regular’ choice and the weak axiom of stochastic revealed preference," Economic Theory, Springer, vol. 31(1), pages 35-50, April.
  3. John Quah, 2006. "Weak axiomatic demand theory," Economic Theory, Springer, vol. 29(3), pages 677-699, November.
  4. WILLIAM J. McCAUSLAND, 2009. "Random Consumer Demand," Economica, London School of Economics and Political Science, vol. 76(301), pages 89-107, 02.
  5. Bandyopadhyay, Taradas & Dasgupta, Indraneel & Pattanaik, Prasanta K., 1999. "Stochastic Revealed Preference and the Theory of Demand," Journal of Economic Theory, Elsevier, vol. 84(1), pages 95-110, January.
  6. Eddie Dekel, 1997. "A Unique Subjective State Space for Unforeseen Contingencies," Discussion Papers 1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, October.
  8. Dasgupta Indraneel, 2009. "Supply Theory sans Profit Maximization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-16, July.
  9. Barbera, Salvador & Pattanaik, Prasanta K, 1986. "Falmagne and the Rationalizability of Stochastic Choices in Terms of Random Orderings," Econometrica, Econometric Society, vol. 54(3), pages 707-15, May.
  10. J. C. R. Alcantud, 2003. "Stochastic demand correspondences and their aggregation properties," Microeconomics 0309001, EconWPA, revised 08 Jan 2005.
  11. Indraneel Dasgupta, 2005. "Consistent firm choice and the theory of supply," Economic Theory, Springer, vol. 26(1), pages 167-175, 07.
  12. Sen, Amartya K, 1971. "Choice Functions and Revealed Preference," Review of Economic Studies, Wiley Blackwell, vol. 38(115), pages 307-17, July.
  13. Daniel McFadden, 2005. "Revealed stochastic preference: a synthesis," Economic Theory, Springer, vol. 26(2), pages 245-264, 08.
  14. Chiappori, Pierre-Andre & Rochet, Jean-Charles, 1987. "Revealed Preferences and Differentiable Demand: Notes and Comments," Econometrica, Econometric Society, vol. 55(3), pages 687-91, May.
  15. Bandyopadhyay, Taradas & Bandyopadhyay, Bandyopadhyay & Pattanaik, Prasanta K., 2002. "Demand Aggregation and the Weak Axiom of Stochastic Revealed Preference," Journal of Economic Theory, Elsevier, vol. 107(2), pages 483-489, December.
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Cited by:
  1. Dasgupta, Indraneel, 2009. "Contraction Consistent Stochastic Choice Correspondence," IZA Discussion Papers 4596, Institute for the Study of Labor (IZA).

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