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Axiomatic Models of Rational Behavior and Interpretations

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  • Susanne Fuchs-Seliger

    (Institut für Volkswirtschaftslehre (ECON), Karlsruher Institut für Technologie)

Abstract

In order to build a model of rational behavior in economics we can start with a function describing the agent’s behavior through reasonable properties from which preferences can be deduced. Conversely, the model can be based on a preference relation which is assumed to possess some properties implying the existence of a reasonable choice correspondence. Both approaches allow potent models of the individual’s behavior to be constructed. In this article it will be shown that the axioms of a model describing rational behavior by a real-valued function can be interpreted by the well-known income compensation function depending on a given preference relation. Accordingly, we will introduce a second model describing the individual behavior. As an interpretation the distance function, a widely used tool in economics, can be shown to fulfill the axioms of the second model. These different approaches make it possible to analyze choice behavior from different points of view. Hence, we may achieve a deeper insight into the economic problems lying behind these approaches.

Suggested Citation

  • Susanne Fuchs-Seliger, 2016. "Axiomatic Models of Rational Behavior and Interpretations," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 33(4), pages 385-401, December.
    • Handle: RePEc:spr:homoec:v:33:y:2016:i:4:d:10.1007_s41412-016-0032-1
    DOI: 10.1007/s41412-016-0032-1
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    References listed on IDEAS

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    Cited by:

    1. Fuchs-Seliger, Susanne, 2019. "Structures of rational behavior in economics," Working Paper Series in Economics 136, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.

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    More about this item

    Keywords

    Economic models; Demand functions; Income compensation functions; Distance functions; Rationality; Preferences;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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