What Is Revealed Preference?
Revealed Preference Theory is an economical term proposed by P. Samuelson. Its basic spirit is: a consumer's purchase behavior under a certain price condition exposes or shows his inherent preference tendency. Therefore, we can infer consumer preferences based on their purchasing behavior. This is not a logical idea based on "preference relationship (utility function) consumer choice", but a reverse process, that is, "consumer choice preference relationship".
Explicit preference
Right!
- Chinese name
- Explicit preference
- Foreign name
- Revealed Preference Theory
- proposer
- P. Samuelson
- Subject
- economics
- Revealed Preference Theory is an economical term proposed by P. Samuelson. Its basic spirit is: a consumer's purchase behavior under a certain price condition exposes or shows his inherent preference tendency. Therefore, we can infer consumer preferences based on their purchasing behavior. This is not a logical idea based on "preference relationship (utility function) consumer choice", but a reverse process, that is, "consumer choice preference relationship".
- First, the principle of display preference
- Let the consumer bundle purchased when the price is (p1, p2) be (x1, x2). If another product combination (y1, y2) meets the following conditions:
- p1x1 + p2x2> = p1y1 + p2y2 Equation 1
- In this case, if the consumer always chooses the product bundle he prefers among the product bundles he can buy, there must be a preference for (x1, x2) greater than (y1, y2), that is (x1, x2 ) Is the direct display preference of (y1, y2).
- Second, indirect explicit preferences
- If (x1, x2) is the direct display preference of (y1, y2) and (y1, y2) is the direct display preference of (z1, z2), then (x1, x2) is the indirect display preference of (z1, z2) .
- 3. Weak Axiom of Display Preference (WARP)
- If (x1, x2) directly displays preferences in (y1, y2), and (x1, x2) and (y1, y2) are two different commodity bundles, then (y1, y2) cannot directly display preferences in ( x1, x2).
- Third, the display preference strong axiom (SARP)
- If (x1, x2) directly or indirectly shows preference for (y1, y2), and (x1, x2) and (y1, y2) are two different commodity bundles, then (y1, y2) cannot be directly or indirectly The display preference is at (x1, x2).