Afriat's theorem for general budget sets
Afriat proved the equivalence of a variant of the strong axiom of revealed preference and the existence of a solution to a set of linear inequalities. From this solution he constructed a utility function rationalizing the choices of a competitive consumer. We extend Afriat's theorem to a class of nonlinear, nonconvex budget sets. We thereby obtain testable implications of rational behavior for a wide class of economic environments, and a constructive method to derive individual preferences from observed choices. We also show that by increasing in a regular way the number of observed choices from our class of budget sets one can fully identify the underlying preference relation.
|Date of creation:||Jan 2009|
|Date of revision:|
|Publication status:||Published in Journal of Economic Theory, 2009, Vol. 144, no. 1. pp. 135-145.Length: 10 pages|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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