Afriat's theorem for general budget sets
AbstractAfriat proved the equivalence of a variant of the strong axiom of revealed preference and the existence of a solution to a set of linear inequalities. From this solution he constructed a utility function rationalizing the choices of a competitive consumer. We extend Afriat's theorem to a class of nonlinear, nonconvex budget sets. We thereby obtain testable implications of rational behavior for a wide class of economic environments, and a constructive method to derive individual preferences from observed choices. We also show that by increasing in a regular way the number of observed choices from our class of budget sets one can fully identify the underlying preference relation.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 144 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/622869
GARP Rational choice Revealed preferences SARP WARP;
Other versions of this item:
- Francoise Forges & Enrico Minelli, 2006. "Afriat’s Theorem for General Budget Sets," CESifo Working Paper Series 1703, CESifo Group Munich.
- Forges, Françoise & Minelli, Enrico, 2009. "Afriat's theorem for general budget sets," Economics Papers from University Paris Dauphine 123456789/4099, Paris Dauphine University.
- Francoise Forges & Enrico Minelli, 2006. "Afriat's Theorem for General Budget Sets," Working Papers ubs0609, University of Brescia, Department of Economics.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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