Stochastic demand correspondences and their aggregation properties

José Carlos Rodríguez Alcantud ()

Microeconomics from EconWPA

Abstract: Bandyopadhyay, Dasgupta and Pattanaik [JET, 2002] have presented a construction that aggregates standard demand functions by a stochastic demand function, in such way that the latter satisfies the weak axiom of stochastic revealed preference when the former full Samuelson's weak axiom of revealed preference. We introduce a concept of stochastic demand correspondences and generalize WASRP to this new setting. Also, we propose a procedure to aggregate stochastic demand correspondences that (a) includes the previous one by those authors, (b) aggregates the weak axiom of stochastic revealed preference (and thus stochastic substitutability when we started with tight stochastic demand func- tions), and (c) produces a stochastically rational stochastic demand correspondence when the primitive ones are stochastically rational. Interpretations of the model are provided too. An analogous to the result that rationalizability of stochastic demand functions by stochastic orderings implies WASRP holds for the correspondence setting. We also dis- cuss the convenience of adopting a formal variation of the notion of being stochastically rational that was proposed in the literature.

JEL-codes: D1 D2 D3 D4 (search for similar items in EconPapers)
Date: 2005-01-08
Note: Type of Document - pdf; pages: 15
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Working Paper: Stochastic demand correspondences and their aggregation properties (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpmi:0501004

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