The geometry of revealed preference |
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Affiliation: | 1. Department of Epizootiology, Faculty of Veterinary Medicine, University of Warmia and Mazury in Olsztyn, St. Oczapowskiego 01/29, 10-718 Olsztyn, Poland;2. Boehringer Ingelheim Sp. z o.o., St. Wolska 5, 02-675 Warszawa, Poland;3. Department of Veterinary Prevention and Feed Hygiene, Faculty of Veterinary Medicine, University of Warmia and Mazury in Olsztyn, ul. Oczapowskiego 13/29, 10-718 Olsztyn, Poland |
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Abstract: | In this paper, we examine how the geometry underlying revealed preference determines the set of preferences that can be revealed by choices. Specifically, given an arbitrary binary relation defined on a finite set, we ask if and when there exists a data set which can generate the given relation through revealed preference. We show that the dimension of the consumption space affects the set of revealed preference relations. If the consumption space has more goods than observations, any revealed preference relation can arise. Conversely, if the consumption space has low dimension relative to the number of observations, then there exist both rational and irrational preference relations that can never be revealed by choices. |
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Keywords: | Revealed preference Geometry Experimental design |
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