Abstract / Description of output
I prove that as long as we allow the marginal utility for money (symbol) 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 (symbol) is approximately constant. I provide a simple constructive
proof for the necessary and sufficient condition for the constant (symbol) rationalization, which I argue should replace the Generalized Axiom of
Revealed Preference in empirical studies of consumer behavior.
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 (symbol) is approximately constant. I provide a simple constructive
proof for the necessary and sufficient condition for the constant (symbol) rationalization, which I argue should replace the Generalized Axiom of
Revealed Preference in empirical studies of consumer behavior.
| Original language | English |
|---|---|
| Publisher | Edinburgh School of Economics Discussion Paper Series |
| Number of pages | 8 |
| Publication status | Published - 18 Jan 2012 |
Publication series
| Name | ESE Discussion Papers |
|---|---|
| No. | 212 |