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Ch3_class_09 - Chapter Three Preferences Rationality in...

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Chapter Three Preferences
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Rationality in Economics Behavioral Postulate : A decisionmaker always chooses its most preferred alternative from its set of available alternatives. So to model choice, we must model decisionmakers’ preferences.
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Preference Relations Comparing two different consumption bundles, x and y: strict preference : x is more preferred than y is. weak preference : x is as at least as preferred as y is. indifference : x is exactly as preferred as y is. ) , ( 2 1 x x x = ) , ( 2 1 x x =
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Preference Relations denotes strict preference; x y means bundle x is preferred strictly to bundle y. denotes indifference; x y means x and y are equally preferred. r r
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Preference Relations denotes strict preference so x y means that bundle x is strictly preferred to bundle y. denotes indifference; x y means x and y are equally preferred. denotes weak preference; x y means x is preferred at least as much as is y . ~ ~ ° °
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Preference Relations x y and y x imply x y. x y and not y x imply x y. ~ ~ ~ ~ °
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Assumptions about Preference Relations Completeness : For any two bundles x and y, it is always possible to make the statement that either x y or y x.
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