Two Axioms of revealed Preference To apply revealed preference analysis, choices must satisfy two criteria - the Weak and the strong Axioms of revealed preference
Two Axioms of Revealed Preference To apply revealed preference analysis, choices must satisfy two criteria -- the Weak and the Strong Axioms of Revealed Preference
The Weak axiom of revealed Preference (WARP) If the bundle x is revealed directly as preferred to the bundle y then it is never the case that y is revealed directly as preferred to x; i.e x 2y not(y >x)
The Weak Axiom of Revealed Preference (WARP) If the bundle x is revealed directly as preferred to the bundle y then it is never the case that y is revealed directly as preferred to x; i.e. x y not (y x). D p D p
The Weak axiom of revealed Preference (WARP) Choice data which violate the warp are inconsistent with economic rationality The WARP is a necessary condition for applying economic rationality to explain observed choices
The Weak Axiom of Revealed Preference (WARP) Choice data which violate the WARP are inconsistent with economic rationality. The WARP is a necessary condition for applying economic rationality to explain observed choices
The Weak Axiom of revealed Preference (WARP) What choice data violate the warP?
The Weak Axiom of Revealed Preference (WARP) What choice data violate the WARP?
The Weak Axiom of revealed Preference (WARP) x is chosen when y is available SO X b y y is chosen when x is available y D X
The Weak Axiom of Revealed Preference (WARP) x2 x1 x y y is chosen when x is available so y x. x is chosen when y is available so x y. D p D p