Rationalizable choice functions

We study choice functions which arise in the context of matching with contracts. A choice function is rationalizable if it coincides with a choice function induced by a preference relation over sets of contracts. We show that a choice function is rationalizable if and only if it satisfies the Strong...

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Bibliographic Details
Published in:Games and economic behavior 2020-09, Vol.123, p.120-126
Main Author: Yang, Yi-You
Format: Article
Language:English
Subjects:
Choice function
Path independence
Rationalizability
Revealed preference
Stable matching
Substitutability
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Summary:We study choice functions which arise in the context of matching with contracts. A choice function is rationalizable if it coincides with a choice function induced by a preference relation over sets of contracts. We show that a choice function is rationalizable if and only if it satisfies the Strong Axiom of Revealed Preference (SARP), and give an algorithm for verifying the rationalizability of a given choice function. Consequently, we prove that every path independent choice function is rationalizable. This implies that under the substitutability assumption, the rationalizability condition and the irrelevance of rejected contracts (IRC) condition are equivalent.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2020.07.003