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The Effect of Indivisibilities in Consumer Choice Theory

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  • Edward Gordon

Abstract

Consumer choice theory is normally based on the assumption that the domain of commodity mixes which can be chosen is continuously divisible (dense). The effects on consumer choice behavior recently attributed by Harwitz to indivisibilities are shown to be due to the removal of strong convexity and strict monotonicity from the expressed binary preference properties. A binary preference axiomatic treatment is presented which is applicable in the presence of indivisibilities. Tolerance to indivisibilities in the decision domain is accomplished with three binary preference axioms which are sufficient to assure the existence of a utility function. One axiom is added for the budget constraint and another to cover the expenditure minimization concept of rational behavior. With these five axioms, Samuelson's weak axiom and fundamental theorem of consumer behavior can be extended to be applicable with indivisibilities in the decision domain.

Suggested Citation

  • Edward Gordon, 1970. "The Effect of Indivisibilities in Consumer Choice Theory," The American Economist, Sage Publications, vol. 14(2), pages 47-56, October.
    • Handle: RePEc:sae:amerec:v:14:y:1970:i:2:p:47-56
    DOI: 10.1177/056943457001400205
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