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Consumer theory with bounded rational preferences

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  • Gerasímou, Georgios

Abstract

Abstract Building on the work of Shafer (1974), this paper provides a continuous bivariate representation theorem for preferences that need not be complete or transitive. Applying this result to the problem of choice from competitive budget sets allows for a proof of the existence of a demand correspondence for a consumer who has preferences within this class that are also convex. Similarly to the textbook theory of utility maximization, this proof also uses the Maximum Theorem. With an additional mild convexity axiom that conceptually parallels uncertainty aversion, the correspondence reduces to a function that satisfies WARP.

Suggested Citation

  • Gerasímou, Georgios, 2010. "Consumer theory with bounded rational preferences," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 708-714, September.
  • Handle: RePEc:eee:mateco:v:46:y:2010:i:5:p:708-714
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    1. repec:spr:joinma:v:28:y:2017:i:5:d:10.1007_s10845-015-1042-8 is not listed on IDEAS
    2. F. Tao & Y. Cheng & L. Zhang & A. Y. C. Nee, 0. "Advanced manufacturing systems: socialization characteristics and trends," Journal of Intelligent Manufacturing, Springer, vol. 0, pages 1-16.
    3. Georgios Gerasimou, 2013. "On continuity of incomplete preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(1), pages 157-167, June.

    More about this item

    Keywords

    Incomplete & intransitive preferences Representation Demand;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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