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Revealed smooth nontransitive preferences

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  • Hans Keiding

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  • Mich Tvede

    ()

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    Abstract

    In the present paper, we are concerned with the behavioural consequences of consumers having nontransitive preference relations. Data sets consist of finitely many observations of price vectors and consumption bundles. A preference relation rationalizes a data set provided that for every observed consumption bundle, all strictly preferred bundles are more expensive than the observed bundle. Our main result is that data sets can be rationalized by a smooth nontransitive preference relation if and only if prices can normalized such that the law of demand is satisfied. Market data sets consist of finitely many observations of price vectors, lists of individual incomes and aggregate demands. We apply our main result to characterize market data sets consistent with equilibrium behaviour of pure-exchange economies with smooth nontransitive consumers. Copyright Springer-Verlag Berlin Heidelberg 2013

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    Bibliographic Info

    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 54 (2013)
    Issue (Month): 3 (November)
    Pages: 463-484

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    Handle: RePEc:spr:joecth:v:54:y:2013:i:3:p:463-484

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    Related research

    Keywords: Law of demand; Revealed preferences; GARP; SARP; SSARP; WARP; D1; D5;

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    1. Brown, Donald J & Matzkin, Rosa L, 1996. "Testable Restrictions on the Equilibrium Manifold," Econometrica, Econometric Society, vol. 64(6), pages 1249-62, November.
    2. Vadim Cherepanov & Tim Feddersen & Alvaro Sandroni, 2013. "Revealed preferences and aspirations in warm glow theory," Economic Theory, Springer, vol. 54(3), pages 501-535, November.
    3. Yves Balasko & Mich Tvede, 2010. "General equilibrium without utility functions: how far to go?," Economic Theory, Springer, vol. 45(1), pages 201-225, October.
    4. John Quah, 2000. "Weak Axiomatic Demand Theory," Economics Series Working Papers 2000-W12, University of Oxford, Department of Economics.
    5. Kihlstrom, Richard E & Mas-Colell, Andreu & Sonnenschein, Hugo, 1976. "The Demand Theory of the Weak Axiom of Revealed Preference," Econometrica, Econometric Society, vol. 44(5), pages 971-78, September.
    6. Francoise Forges & Enrico Minelli, 2006. "Afriat's Theorem for General Budget Sets," Working Papers ubs0609, University of Brescia, Department of Economics.
    7. Forges, Françoise & Iehlé, Vincent, 2013. "Essential Data, Budget Sets and Rationalization," Economics Papers from University Paris Dauphine 123456789/9256, Paris Dauphine University.
    8. Shafer, Wayne J, 1974. "The Nontransitive Consumer," Econometrica, Econometric Society, vol. 42(5), pages 913-19, September.
    9. Yves Balasko & Mich Tvede, 2010. "Individual preference rankings compatible with prices, income distributions and total resources," Economic Theory, Springer, vol. 45(3), pages 497-513, December.
    10. 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.
    11. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
    12. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 419-25, July.
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    Cited by:
    1. Alfred Galichon & John Quah, 2013. "Symposium on revealed preference analysis," Economic Theory, Springer, vol. 54(3), pages 419-423, November.

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