Revealed cardinal preference

Research output: Working paper

Abstract

I prove that as long as we allow the marginal utility for money lamda to vary between purchases (similarly to the budget) then the quasi-linear and the ordinal budget-constrained models rationalize the same data. However, we know that lamda is approximately constant. I provide a simple constructive proof for the necessary and sufficient condition for the constant lambda rationalization, which I argue should replace the Generalized Axiom of Revealed Preference in empirical studies of consumer behavior.
Original languageEnglish
PublisherEdinburgh School of Economics, University of Edinburgh
Publication statusPublished - 2012

Publication series

NameESE Discussion Papers
No.212

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