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Structures of rational behavior in economics

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  • Fuchs-Seliger, Susanne

Abstract

Describing individual behavior, we will be concerned with an axiom system, which can be interpreted by Shephard's distance function. Based on this function, one can discover the individual's preference relation, from which the individual's demand function can be derived. We will realize that the axiom system describes rational behavior, satisfying the Strong Axiom of Revealed Preference. The axiom system presented in this article is closely related to a former one describing consumer behavior by income compensation functions. These different approaches will help to illuminate choice behavior from different points of view. We will also see that the axiom system presented in this article can be interpreted by the economic quantity index in welfare theory and by distance functions in producer theory.

Suggested Citation

  • Fuchs-Seliger, Susanne, 2019. "Structures of rational behavior in economics," Working Paper Series in Economics 136, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    • Handle: RePEc:zbw:kitwps:136
    DOI: 10.5445/IR/1000098471
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    References listed on IDEAS

    as
    1. Lionel McKenzie, 1957. "Demand Theory Without a Utility Index," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(3), pages 185-189.
    2. Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, October.
    3. Susanne Fuchs-Seliger, 2016. "Axiomatic Models of Rational Behavior and Interpretations," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 33(4), pages 385-401, December.
    4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, October.
    5. Fuchs-Seliger, Susanne, 1990. "An axiomatic approach to compensated demand," Journal of Economic Theory, Elsevier, vol. 52(1), pages 111-122, October.
    6. Angus Deaton, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 391-405.
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    More about this item

    Keywords

    Economic Models; Demand Functions; Distance Functions; Rationality; Producer Theory; Welfare Theory;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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