Rationalizability, Cost-Rationalizability, and Afriat's Efficiency Index

Matthew Polisson and John Quah

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: This note explains the equivalence between approximate rationalizability and ap- proximate cost-rationalizability within the context of consumer demand. In connection with these results, we interpret Afriat's (1973) critical cost efficiency index (CCEI) as a measure of cost (in)efficiency, in the sense that a consumer is spending more money than is required to achieve her utility targets.

Date: 2022-01-05
New Economics Papers: this item is included in nep-eff and nep-upt
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