The Propensity Function as General Formalization of Economic Man/Woman

30 Pages Posted: 12 Oct 2011 Last revised: 29 Apr 2015

Egmont Kakarot-Handtke

University of Stuttgart - Institute of Economics and Law

Date Written: October 11, 2011

Abstract

The present paper demonstrates how the interaction of the structural axiomatic core and the behavioral propensity function produces dynamically stable outcomes in the product market. The propensity function is a compact formal expression of random, semi-random, and deterministic behavioral assumptions. Its two components are direction and magnitude of the rate of change of an elementary axiomatic variable. A type-C propensity function is the formal container for a familiar conception that is known as qualitative prediction. In a random environment, two type-C functions are sufficient to produce stochastic stability and optimality in the product market. The propensity function is truly general.

Keywords: new framework of concepts, structure-centric, axiom set, qualitative prediction, tendency laws, separability, determinism–indeterminism, information function, action function, simulation, Gossen’s Law

JEL Classification: D01, D03

Suggested Citation

Kakarot-Handtke, Egmont, The Propensity Function as General Formalization of Economic Man/Woman (October 11, 2011). Available at SSRN: https://ssrn.com/abstract=1942202 or http://dx.doi.org/10.2139/ssrn.1942202

Egmont Kakarot-Handtke (Contact Author)

University of Stuttgart - Institute of Economics and Law ( email )

Keplerstrasse 17
Stuttgart
Germany

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