Afriat's Theorem for Indivisible Goods

18 Pages Posted: 6 Dec 2013

See all articles by Francoise Forges

Francoise Forges

Université Paris Dauphine - CEREMADE; CESifo (Center for Economic Studies and Ifo Institute)

Vincent Iehlé

Université Paris Dauphine - CEREMADE

Date Written: November 29, 2013

Abstract

We identify a natural counterpart of the standard GARP for demand data in which goods are all indivisible. We show that the new axiom (DARP, for “discrete axiom of revealed preference”) is necessary and sufficient for the rationalization of the data by a well-behaved utility function. Our results complement the main finding of Polisson and Quah, Am. Econ. J.: Micro. 5(1) p.28-34 (2013), who rather minimally modify the original consumer problem with indivisible goods so that the standard GARP still applies.

Keywords: Afriat’s theorem, GARP, indivisible goods, rationalization, revealed preference

JEL Classification: D110, C810

Suggested Citation

Forges, Francoise and Iehlé, Vincent, Afriat's Theorem for Indivisible Goods (November 29, 2013). CESifo Working Paper Series No. 4498, Available at SSRN: https://ssrn.com/abstract=2363927

Francoise Forges (Contact Author)

Université Paris Dauphine - CEREMADE ( email )

Place du Marechal de Lattre de Tassigny
Paris Cedex 16, 75775
France

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Vincent Iehlé

Université Paris Dauphine - CEREMADE ( email )

Place du Marechal de Lattre de Tassigny
Paris Cedex 16, 75775
France

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