Revealed preference and indifferent selection
AbstractIt is shown that preferences can be constructed from observed choice behavior in a way that is robust to indifferent selection (i.e., the agent is indifferent between two alternatives but, nevertheless, is only observed selecting one of them). More precisely, a suggestion by Savage [Savage, L.J., 1954. The foundations of statistics. John Wiley and Sons] to reveal indifferent selection by considering small monetary perturbations of alternatives is formalized and generalized to a purely topological framework: preferences over an arbitrary topological space can be uniquely derived from observed behavior under the assumptions that they are continuous and nonsatiated and that a strictly preferred alternative is always chosen, and indifferent selection is then characterized by discontinuity in choice behavior. Two particular cases are then analyzed: monotonic preferences over a partially ordered set, and preferences representable by a continuous pseudo-utility function.
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Date of creation: 2008
Date of revision:
Publication status: Published, Mathematical Social Sciences, 2008, 55, 24-37
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Revealed preference; Indifference; Continuity; Nonsatiation; Monotonicity; Pseudo-utility;
Other versions of this item:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
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