On Revealed Preference and Indivisibilities

Satoru Fujishige and Zaifu Yang

Discussion Papers from Department of Economics, University of York

Abstract: 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.

Keywords: Afriat's theorem; GARP; indivisibilities; revealed preference. (search for similar items in EconPapers)
JEL-codes: C60 D11 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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