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Revealed smooth nontransitive preferences

Lookup NU author(s): Professor Mich Tvede

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Abstract

In the present paper, we are concerned with the behavioural consequences of consumers having nontransitive preference relations. Data sets consist of finitely many observations of price vectors and consumption bundles. A preference relation rationalizes a data set provided that for every observed consumption bundle, all strictly preferred bundles are more expensive than the observed bundle. Our main result is that data sets can be rationalized by a smooth nontransitive preference relation if and only if prices can normalized such that the law of demand is satisfied. Market data sets consist of finitely many observations of price vectors, lists of individual incomes and aggregate demands. We apply our main result to characterize market data sets consistent with equilibrium behaviour of pure-exchange economies with smooth nontransitive consumers.

Publication metadata

Author(s): Keiding K, Tvede M

Publication type: Article

Publication status: Published

Journal: Economic Theory

Year: 2013

Volume: 54

Issue: 3

Pages: 463-484

Print publication date: 04/07/2013

ISSN (print): 0938-2259

ISSN (electronic): 1432-0479

Publisher: Springer

URL: http://dx.doi.org/10.1007/s00199-013-0765-z

DOI: 10.1007/s00199-013-0765-z

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