On Revealed Preference and Indivisibilities
AbstractWe consider a market model in which all commodities are inherently indivisible and thus are traded in integer quantities. We ask whether a finite set of price-quantity observations satisfying the Generalized Axiom of Revealed Preference (GARP) is consistent with utility maximization. Although familiar conditions such as non-satiation become meaningless in the current discrete model, by refining the standard notion of demand set we show that Afriat's celebrated theorem still holds true. Exploring network structure and a new and easy-to-use variant of GARP, we propose an elementary, simple, intuitive, combinatorial, and constructive proof for the result.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 12/02.
Date of creation: Jan 2012
Date of revision:
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More information through EDIRC
Afriat's theorem; GARP; indivisibilities; revealed preference.;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-25 (All new papers)
- NEP-MIC-2012-01-25 (Microeconomics)
- NEP-UPT-2012-01-25 (Utility Models & Prospect Theory)
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