Revealed Preference in Decision-Making: Some Conceptual Issues
Keywords:
decision-making, consistent behaviour, Weak Axiom of Revealed Preference, Weakened-WARP, WARSPAbstract
We show that a common and popular argument against two weaker versions of the Weak Axiom of Revealed Preference arises due to incorrect framing of the decision-making problem by the decision analyst. We compare the implications of the Weak Axiom of Revealed Preference with its two weaker versions and show that a violation of any of the two axioms discussed here would manifest itself in a kind of inconsistency in the behaviour of the decision maker that leads to the decision maker’s bankruptcy.
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