A General Revealed Preference Theorem for Stochastic Demand Behavior

We present a general revealed preference theorem concerning stochastic choice behavior by consumers. We show that, when the consumer spends her entire wealth, the Weak Axiom of Stochastic Revealed Preference due to Bandyopadhyay, Dasgupta, and Pattanaik (1999) is equivalent to a restriction on stoch...

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Bibliographic Details
Published in:Economic theory 2004-04, Vol.23 (3), p.589-599
Main Authors: Bandyopadhyay, Taradas, Dasgupta, Indraneel, Pattanaik, Prasanta K.
Format: Article
Language:English
Subjects:
Consumer behavior
Consumer choice
Consumer preferences
Consumers
Consumption
Demand
Demand curves
Determinism
Economic behaviour
Economic theory
Economics
Income inequality
Inequality
Mathematical functions
Observed choices
Ordered pairs
Preferences
Prices
Revealed preferences
Stochastic models
Stochastic processes
Studies
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Summary:We present a general revealed preference theorem concerning stochastic choice behavior by consumers. We show that, when the consumer spends her entire wealth, the Weak Axiom of Stochastic Revealed Preference due to Bandyopadhyay, Dasgupta, and Pattanaik (1999) is equivalent to a restriction on stochastic demand behavior that we call stochastic substitutability. We also show that the relationship between the Weak Axiom of Revealed Preference and Samuelson's inequality in the deterministic theory, and the main result of Bandyopadhyay, Dasgupta, and Pattanaik (1999) are both special cases of our result.
ISSN:0938-2259
1432-0479
DOI:10.1007/s00199-003-0388-x