Afriat's theorem for general budget sets |
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Authors: | Françoise Forges |
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Institution: | a CEREMADE, Université Paris - Dauphine, France b Facoltà di Economia, Università di Brescia, via San Faustino 74b, 25122 Brescia, Italy |
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Abstract: | Afriat proved the equivalence of a variant 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, nonconvex 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. We also show that by increasing in a regular way the number of observed choices from our class of budget sets one can fully identify the underlying preference relation. |
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Keywords: | D11 D43 C72 |
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