Revealed Preference and Bounded Rationality

Douglas Gale

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    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.

    Original languageEnglish (US)
    Title of host publicationThe Foundations of Positive and Normative Economics
    Subtitle of host publicationA Hand Book
    PublisherOxford University Press
    ISBN (Electronic)9780199851768
    ISBN (Print)9780195328318
    DOIs
    StatePublished - Oct 3 2011

    Keywords

    • Choice behavior
    • Economic theory
    • Observable behavior
    • Paul Samuelson
    • Preferences

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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  • Cite this

    Gale, D. (2011). Revealed Preference and Bounded Rationality. In The Foundations of Positive and Normative Economics: A Hand Book Oxford University Press. https://doi.org/10.1093/acprof:oso/9780195328318.003.0011