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Title:Afriat's theorem for general budget sets PDF Logo
Authors:Forges, Françoise
Minelli, Enrico
Issue Date:2006
Series/Report no.:CESifo working paper 1703
Abstract:Afriat (1967) showed the equivalence 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 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. In an application to market games, we identify a set of observable restrictions characterizing Nash equilibrium outcomes.
JEL:D11
D43
C72
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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