Testing Strictly Concave Rationality
We prove that the Strong Axiom of Revealed Preference tests the existence of a strictly quasiconcave (in fact, continuous, generically C(infinity), strictly concave, and strictly monotone) utility function generating finitely many demand observations. This sharpens earlier results of Afriat, Diewert, and Varian that tested ("nonparametrically") the existence of a piecewise linear utility function that could only weakly generate those demand observations. When observed demand is also invertible, we show that the rationalizing can be done in a C(infinity) way, thus extending a result of Chiappori and Rochet from compact sets to all of R(n). For finite data sets, one implication of our result is that even some weak types of rational behavior -- maximization of pseudotransitive or semitransitive preferences -- are observationally equivalent to maximization of continuous, strictly concave, and strictly monotone utility functions.
|Date of creation:||Nov 1987|
|Publication status:||Published in Journal of Economic Theory (April 1991), 53(2): 287-303|
|Contact details of provider:|| Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA|
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.yale.edu/
More information through EDIRC
|Order Information:|| Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:844. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matthew C. Regan)
If references are entirely missing, you can add them using this form.