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The Foundations of Positive and Normative EconomicsA Hand Book$
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Andrew Caplin and Andrew Schotter

Print publication date: 2008

Print ISBN-13: 9780195328318

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195328318.001.0001

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Revealed Preference and Bounded Rationality

Revealed Preference and Bounded Rationality

Chapter:
(p.281) Chapter 11 Revealed Preference and Bounded Rationality
Source:
The Foundations of Positive and Normative Economics
Author(s):

DOUGLAS GALE

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195328318.003.0011

Perhaps, Paul Samuelson really did not intend to ground economic theory on observable behavior because, as we observe in the revealed-preference theory, we consider only the prices and particular quantities instead of looking into preferences and other motivating factors when accounting for a finite set of prices and a corresponding set of choices. Through this situation, we observe how Samuelson assumed that an individual's preferences remains unchanged over time. By analyzing the genalized axiom of revealed preference (GARP) and how, when this is satisfied, it may lead to utility maximization, this chapter attempts to examine whether it is acceptable or not to infer preferences from observations of choice behavior.

Keywords:   Paul Samuelson, economic theory, observable behavior, preferences, choice behavior

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