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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
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| Title: | | Afriat's theorem for general budget sets  |
| 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 Afriats 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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