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The generality of the strong axiom

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  • Cristián Ugarte

    (Charles River Associates)

Abstract

Economic research usually endows consumers with a strictly concave utility function. When choices are rationalizable, this assumption can be tested by the strong axiom of revealed preferences, SARP, as if they fail such a test, the convexity of the utility is not strict. We extend this test to non-rationalizable choices using partial efficiency, the most popular method to analyze such choices. Under partial efficiency, a strictly concave utility cannot be tested. Hence, the existence of a strictly concave utility is falsified if, and only if, choices are rationalizable but fail SARP, which we do not observe in laboratory data. From an empirical standpoint, our results suggest that assuming a strictly concave utility does not carry a cost.

Suggested Citation

  • Cristián Ugarte, 2025. "The generality of the strong axiom," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 80(4), pages 965-988, December.
    • Handle: RePEc:spr:joecth:v:80:y:2025:i:4:d:10.1007_s00199-025-01653-5
    DOI: 10.1007/s00199-025-01653-5
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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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