On Revealed Preference and Indivisibilities
We consider a market model in which all commodities are inherently indivisible and thus are traded in integer quantities. We ask whether a finite set of price-quantity observations satisfying the Generalized Axiom of Revealed Preference (GARP) is consistent with utility maximization. Although familiar conditions such as non-satiation become meaningless in the current discrete model, by refining the standard notion of demand set we show that Afriat's celebrated theorem still holds true. Exploring network structure and a new and easy-to-use variant of GARP, we propose an elementary, simple, intuitive, combinatorial, and constructive proof for the result.
|Date of creation:||Jan 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/
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- Richard Blundell & Martin Browning & Ian Crawford, 2002.
"Nonparametric Engel Curves and Revealed Preference,"
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2002-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
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- M.J. Todd & A. Fostel & H.E. Scarf, 2004.
"Two New Proofs of Afriat's Theorem,"
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632, Econometric Society.
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- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007.
"The Collective Model of Household Consumption: A nonparametric characterization,"
ULB Institutional Repository
2013/98559, ULB -- Universite Libre de Bruxelles.
- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, 03.
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- Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2007. "The collective model of household consumption : A nonparametric characterization," Other publications TiSEM 0a104373-4fb6-4ef2-9d2b-2, Tilburg University, School of Economics and Management.
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- W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
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