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Rationalizable choice functions

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  • Yang, Yi-You

Abstract

We study choice functions which arise in the context of matching with contracts. A choice function is rationalizable if it coincides with a choice function induced by a preference relation over sets of contracts. We show that a choice function is rationalizable if and only if it satisfies the Strong Axiom of Revealed Preference (SARP), and give an algorithm for verifying the rationalizability of a given choice function. Consequently, we prove that every path independent choice function is rationalizable. This implies that under the substitutability assumption, the rationalizability condition and the irrelevance of rejected contracts (IRC) condition are equivalent.

Suggested Citation

  • Yang, Yi-You, 2020. "Rationalizable choice functions," Games and Economic Behavior, Elsevier, vol. 123(C), pages 120-126.
    • Handle: RePEc:eee:gamebe:v:123:y:2020:i:c:p:120-126
    DOI: 10.1016/j.geb.2020.07.003
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    References listed on IDEAS

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    1. Koji Yokote & Isa E. Hafalir & Fuhito Kojima & M. Bumin Yenmez, 2023. "Rationalizing Path-Independent Choice Rules," Papers 2303.00892, arXiv.org, revised May 2024.

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    More about this item

    Keywords

    Choice function; Rationalizability; Revealed preference; Path independence; Substitutability; Stable matching;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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