Week 1 Lecture_Preferences

Week 1 Lecture_Preferences - Week 1 Lecture Preferences...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Week 1 Lecture Preferences Rationality in Economics • Behavioral Assumption : A decisionmaker always chooses its most preferred alternative from its set of available alternatives. • So to model choice we must model decisionmakers’ preferences. I magine a survey • How would you compare two different consumption bundles, x and y? (can choose more than one) A. x is better than y. B. x is at least as good as y. C. x is exactly as good as y. D. Cannot compare the two. Preference Relations • Comparing two different consumption bundles, x and y: – x is better than y : strict preference “x is strictly preferred to y”. – x is at least as good as y: weak preference “x is weakly preferred to y”. – x is exactly as good as y : I ndifference “x is indifferent to y”. Preference Relations • Strict preference, weak preference and indifference are all preference relations. • Particularly, they are ordinal relations; i.e. they state only the order in which bundles are preferred. Preference Relations • denotes strict preference; x y means that bundle x is preferred strictly to bundle y. 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. Preference Relations • denotes strict preference so x y means that bundle x is preferred strictly 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. ~ ~ Preference Relations • x y and y x imply x ∼ y. ~ ~ Preference Relations • x y and y x imply x ∼ y. • x y and (not y x) imply x y. • We can simplify the survey into two questions: x y ? y x ? ~ ~ ~ ~ & ~ ~ 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. ~ ~ Assumptions about Preference Relations • Reflexivity : Any bundle x is always at least as preferred as itself; i.e....
View Full Document

This note was uploaded on 09/06/2010 for the course FBE ECON2113 taught by Professor Franchsica during the Fall '09 term at HKU.

Page1 / 55

Week 1 Lecture_Preferences - Week 1 Lecture Preferences...

This preview shows document pages 1 - 13. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online