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Just-noticeable difference as a behavioural foundation of the critical cost-efficiency index

Pawel Dziewulski ()

Journal of Economic Theory, 2020, vol. 188, issue C

Abstract: Despite its ad hoc nature and lack of an appealing economic interpretation, the critical cost-efficiency index (or CCEI) proposed in Afriat (1973) is one of the most widespread measures of departures from rationality. In this paper, we provide a behavioural foundation for this index by showing that it is equivalent to a notion of the just-noticeable difference — a measure of dissimilarity between alternatives that is sufficient for the agent to tell them apart.

Keywords: Utility maximisation; Generalised axiom of revealed preference; Critical cost-efficiency index; Interval order; Just-noticeable difference (search for similar items in EconPapers)
JEL-codes: C14 C60 C61 D11 D12 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Just-noticeable difference as a behavioural foundation of the critical cost-efficiency index (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:188:y:2020:i:c:s0022053120300673

DOI: 10.1016/j.jet.2020.105071

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