The generality of the strong axiom

Cristián Ugarte ()
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Cristián Ugarte: Charles River Associates

Economic Theory, 2025, vol. 80, issue 4, No 1, 965-988

Abstract: Abstract Economic research usually endows consumers with a strictly concave utility function. When choices are rationalizable, this assumption can be tested by the strong axiom of revealed preferences, SARP, as if they fail such a test, the convexity of the utility is not strict. We extend this test to non-rationalizable choices using partial efficiency, the most popular method to analyze such choices. Under partial efficiency, a strictly concave utility cannot be tested. Hence, the existence of a strictly concave utility is falsified if, and only if, choices are rationalizable but fail SARP, which we do not observe in laboratory data. From an empirical standpoint, our results suggest that assuming a strictly concave utility does not carry a cost.

Keywords: Revealed preferences; Single-valued demand; Partial efficiency (search for similar items in EconPapers)
JEL-codes: C91 D01 D12 D90 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00199-025-01653-5

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