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On Wold’s approach to representation of preferences

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  • Banerjee, Kuntal
  • Mitra, Tapan

Abstract

This paper presents easily verifiable sufficient conditions on sequence spaces that guarantee representation of preference orders. Our approach involves identifying a suitable subset of the set of alternatives, such that (a) the preference order is representable on this subset, and (b) the subset has the property that for each alternative, there is some element in this subset which is indifferent to it. We follow Wold in choosing this subset to be the diagonal. Our first result uses a weak monotonicity condition (on the diagonal), and a substitution condition, and may be identified as the essence of Wold’s contribution. In the second result, we show that one can obtain a Wold-type representation result when weak monotonicity is replaced by a weak continuity condition. We use the countable order-dense characterization of representability in the proofs of both results, thereby integrating the contributions of Wold (1943) and Debreu (1954). Through a series of examples we show that our representation results are robust; they cannot be improved upon by dropping any of our conditions. An example is also presented to show that existence of degenerate indifference classes is compatible with the representation of monotone preferences. Our study thereby indicates that while the presence of substitution possibilities can be useful in representing preferences, they are not necessary for such results to hold.

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  • Banerjee, Kuntal & Mitra, Tapan, 2018. "On Wold’s approach to representation of preferences," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 65-74.
    • Handle: RePEc:eee:mateco:v:79:y:2018:i:c:p:65-74
    DOI: 10.1016/j.jmateco.2018.08.007
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