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Revealed preference and indifferent selection

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  • Danan, Eric

Abstract

It 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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Suggested Citation

  • Danan, Eric, 2008. "Revealed preference and indifferent selection," Mathematical Social Sciences, Elsevier, vol. 55(1), pages 24-37, January.
  • Handle: RePEc:eee:matsoc:v:55:y:2008:i:1:p:24-37
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    References listed on IDEAS

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    1. Mandler, Michael, 2005. "Incomplete preferences and rational intransitivity of choice," Games and Economic Behavior, Elsevier, vol. 50(2), pages 255-277, February.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    3. Cubitt, Robin P. & Sugden, Robert, 2001. "On Money Pumps," Games and Economic Behavior, Elsevier, vol. 37(1), pages 121-160, October.
    4. Subiza, Begona & Peris, Josep E., 1998. "Nontrivial pseudo-utility functions," Journal of Mathematical Economics, Elsevier, vol. 29(1), pages 67-73, January.
    5. Amartya K. Sen, 1971. "Choice Functions and Revealed Preference," Review of Economic Studies, Oxford University Press, vol. 38(3), pages 307-317.
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    Cited by:

    1. Minardi, Stefania & Savochkin, Andrei, 2015. "Preferences with grades of indecisiveness," Journal of Economic Theory, Elsevier, vol. 155(C), pages 300-331.
    2. Itzhak Gilboa & Fabio Maccheroni & Massimo Marinacci & David Schmeidler, 2010. "Objective and Subjective Rationality in a Multiple Prior Model," Econometrica, Econometric Society, pages 755-770.
    3. Kovács, Máté, 2009. "Kinyilvánított preferencia és racionalitás
      [Declared preference and rationality]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 546-562.
    4. Eric Danan, 2010. "Randomization vs. Selection: How to Choose in the Absence of Preference?," Management Science, INFORMS, pages 503-518.
    5. Kim Kaivanto & Eike Kroll, 2014. "Alternation bias and reduction in St. Petersburg gambles," Working Papers 65600286, Lancaster University Management School, Economics Department.
    6. Faro, José Heleno & Lefort, Jean Philippe, 2013. "Dynamic Objective and Subjective Rationality," Insper Working Papers wpe_312, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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