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

Matthew Polisson and John K. -H. Quah

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Abstract: This note explains the equivalence between approximate rationalizability and approximate 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 approximate rationalizability through cost inefficiency, in the sense that an agent is spending more money than is required to achieve her utility targets.

Date: 2024-06, Revised 2024-07
New Economics Papers: this item is included in nep-eff and nep-upt
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Working Paper: Rationalizability, Cost-Rationalizability, and Afriat's Efficiency Index (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2406.10136

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