Walrasian Solutions Without Utility Functions
This note reviews consumers’ preference orderings in economics and shows that irrationality is a poor explanation for apparent violations of some axioms of order. Apparent violations seem to be better explained by the fact that consum-ers’ utility functions, if they exist at all, might not even belong to the class of quasi-concave functions. However, the main task of markets is the determination of equilibrium price vectors. The note shows in addition that, in Walrasian structures, quasi-concave utility functions are unnecessary for the determination of equilibrium price vectors.
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- Richard H. Thaler, 2000. "From Homo Economicus to Homo Sapiens," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 133-141, Winter.
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