Afriat's Theorem for General Budget Sets

Francoise Forges and Enrico Minelli

Working Papers from University of Brescia, Department of Economics

Abstract: Afriat (1967) showed the equivalence of the strong axiom of revealed preference and the existence of a solution to a set of linear inequalities. From this solution he constructed a utility function rationalizing the choices of a competitive consumer. We extend Afriat’s theorem to a class of nonlinear budget sets. We thereby obtain testable implications of rational behavior for a wide class of economic environments, and a constructive method to derive individual preferences from observed choices. In an application to market games, we identify a set of observable restrictions characterizing Nash equilibrium outcomes.

Date: 2006
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (9)

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Journal Article: Afriat's theorem for general budget sets (2009)
Working Paper: Afriat’s Theorem for General Budget Sets (2006)
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