Mathematical Modeling of Consumer's Preferences Using Partial Differential Equations
AbstractThe aim of this paper is to define consumer's preferences from the differentiable viewpoint in the sense of Debreu. In this framework given the marginal rates of substitution we can consider a vector field to represent consumer's preferences in the microeconomic theory. By definition the marginal rates of substitution satisfy a system of first order partial differential equations. For a continuously differentiable vector field that holds the integrability conditions we provide a general method to solve the system. In the special case of integrable preferences these conditions impose symmetry properties in the underlying preferences. Our results allow to characterize consumer's preferences in terms of the indifference map for the following classes: linear, quasi-linear, separable, homothetic, homothetic and separable. We show that this alternative approach is connected with the traditional formulation concerning the representability of preferences by utility functions. Moreover, we deduce even the general expression of utility functions that satisfy the integrability conditions in the context of ordinal utility.
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Bibliographic InfoPaper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2013-15.
Length: 27 pages
Date of creation: May 2013
Date of revision:
smooth preferences; marginal rates of substitution; indifference map; ordinal utility; integrability conditions; differential equations.;
Find related papers by JEL classification:
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
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- Birendra K. Rai & Chiu Ki So & Aaron Nicholas, 2012. "A Primer On Mathematical Modelling In Economics," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 26(4), pages 594-615, 09.
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