Revealed Pref ch - Revealed Preferences 1 Introduction...

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Revealed Preferences 1 Introduction Alternative approach to the theory of decision making: Choices of an individual are the starting point or the primitive object of the theory. We try to see if the choice behavior of an individual displays some consistency, and if it can arise from maximization behavior. 2 The Weak Axiom of Revealed Preference Choice behavior is represented by a choice structure ( B ,C ( . )): 1. B is a family of nonempty subsets of X , that is, B ∈ B , B X (think of B ’s as the budget sets for different pairs of prices). 2. C ( . ) is a choice rule. For each B ∈ B , it gives the elements of B that the individual chooses: C ( B ) B . Example: X = { French restaurant , Italian restaurant , English restaurant } B = {{ French , Italian } , { French , Italian , English }} One possible (and reasonable!) choice structure ( B ,C 1 ( . )) is: C ( { French , Italian } ) = { French } and C 1 ( { French , Italian , English }} ) = { French
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This note was uploaded on 11/07/2010 for the course ECO 33358 taught by Professor Mathevet during the Fall '10 term at University of Texas at Austin.

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Revealed Pref ch - Revealed Preferences 1 Introduction...

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