Revealed Preference in a Discrete Consumption Space

Matthew Polisson and John Quah

No 12/02, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: We show that an agent maximizing some utility function on a discrete (as opposed to continuous) consumption space will obey the generalized axiom of revealed preference (GARP) so long as the agent obeys cost efficiency. Cost efficiency will hold if there is some good, outside the set of goods being studied by the modeler, that can be consumed by the agent in continuous quantities. An application of Afriat's Theorem then guarantees that there is a strictly increasing utility function on the discrete consumption space that rationalizes price and demand observations in that space.

Keywords: Generalized axiom of revealed preference; Afriat's Theorem; discrete demand; utility maximization (search for similar items in EconPapers)
Date: 2012-01, Revised 2012-02
New Economics Papers: this item is included in nep-mic and nep-upt
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Revealed Preference in a Discrete Consumption Space (2013)
Working Paper: Revealed preference in a discrete consumption space (2012)
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