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Samuelsonian Economics and the Twenty-First Century$
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Michael Szenberg, Lall Ramrattan, and Aron A. Gottesman

Print publication date: 2006

Print ISBN-13: 9780199298839

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199298839.001.0001

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Revealed Preference

Revealed Preference

Chapter:
(p.99) 6 Revealed Preference
Source:
Samuelsonian Economics and the Twenty-First Century
Author(s):

Hal R. Varian

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199298839.003.0007

This chapter emphasizes the utility maximization of Samuelson's Revealed Preference Theory. It looks for consistency, form, forecasting, and recoverability criteria within the theory. It concludes that the strong axiom is necessary and sufficient for utility maximization, as well as rich in empirical content. The logic of the strong axiom runs as follows: If A reveals itself to be ‘better than’ B, and if B reveals itself to be ‘better than’ C, and if C reveals itself to be ‘better than’ D, and so on, then the theory of revealed preference is formulated. Furthermore, say that A can be defined to be ‘revealed to be better than’ Z, as the last in the chain. In such cases, it is postulated that Z must never be revealed to be better than A.

Keywords:   strong axioms, utility maximization, Revealed Preference Theory, better than

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