A Rationalization of the Weak Axiom of Revealed Preference

Victor Aguiar, Per Hjertstrand and Roberto Serrano
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Per Hjertstrand: Research Institute of Industrial Economics, Sweden, https://www.ifn.se/en/

No 20229, University of Western Ontario, Departmental Research Report Series from University of Western Ontario, Department of Economics

Abstract: Samuelson’s (1938) weak (generalized) axiom of revealed preference– WGARP–is a minimal and appealing consistency condition of choice. We offer a rationalization of WGARP in general settings. Our main result is an exact analog of the celebrated Afriat’s theorem, but for WGARP. Its ordinal rationalization is in terms of an asymmetric and locally nonsatiated preference function. Its cardinal rationalization uses a coalitional multi-utility (CMU) maxmin representation with a coherency restriction on the coalition structure. Effectively, the CMU representation aggregates piecemeal preferences within the decision maker (multiple rationales without preference reversals that allow for transitivity violations). Basic consumer theory and welfare analysis are also developed. Extensions to the weak axiom of revealed preference–WARP–and choices obeying the law of demand are included.

Keywords: abstract consumer choice; weak axiom of revealed preference; Afriat’s theorem; asymmetric preference function; coalitional multi-utility rationalization; welfare analysis (search for similar items in EconPapers)
JEL-codes: C60 D10 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
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Working Paper: A Rationalization of the Weak Axiom of Revealed Preference (2020)
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