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<p>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.</p>
Authors
Research Associate University of Leicester
Professor of Economics at the University of Leicester. His research interests are in applied microeconomics and microeconomic theory.
John Quah
Working Paper details
- DOI
- 10.1920/wp.ifs.2012.1203
- Publisher
- IFS
Suggested citation
Polisson, M and Quah, J. (2012). Revealed preference in a discrete consumption space. London: IFS. Available at: https://ifs.org.uk/publications/revealed-preference-discrete-consumption-space (accessed: 5 May 2024).
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