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The Theory of Weak Revealed Preference

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  • Victor H. Aguiar
  • Per Hjertstrand
  • Roberto Serrano

Abstract

We offer a rationalization of the weak generalized axiom of revealed preference (WGARP) for both finite and infinite data sets of consumer choice. We call it maximin rationalization, in which each pairwise choice is associated with a "local" utility function. We develop its associated weak revealed-preference theory. We show that preference recoverability and welfare analysis \`a la Varian (1982) may not be informative enough, when the weak axiom holds, but when consumers are not utility maximizers. We clarify the reasons for this failure and provide new informative bounds for the consumer's true preferences.

Suggested Citation

  • Victor H. Aguiar & Per Hjertstrand & Roberto Serrano, 2019. "The Theory of Weak Revealed Preference," Papers 1906.00296, arXiv.org.
    • Handle: RePEc:arx:papers:1906.00296
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    Cited by:

    1. Madhav Chandrasekher & Mira Frick & Ryota Iijima & Yves Le Yaouanq, 2022. "Dual‐Self Representations of Ambiguity Preferences," Econometrica, Econometric Society, vol. 90(3), pages 1029-1061, May.
    2. Roy Allen & John Rehbeck, 2020. "Counterfactual and Welfare Analysis with an Approximate Model," Papers 2009.03379, arXiv.org.
    3. Pawel Dziewulski, 2021. "A comprehensive revealed preference approach to approximate utility maximisation," Working Paper Series 0621, Department of Economics, University of Sussex Business School.

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