Weak axiomatic demand theory (Q852306)

Yet the maximization hypothesis (which implies that agents have transitive preferences) gives rise to a rich theory of consumer demand, this hypothesis is unsatisfactory in a number of ways. If an agent has a preference which is complete and reflexive but not transitive, its demand function will satisfy the weak, but not necessarily the strong axiom of revealed preference. There are several motivations (discussed in the paper) for developing a demand theory based on the weak axiom rather than on the strong one. For transitive preferences, there is a rich theory of the conditions needed to guarantee the existence of a well-behaved demand function. The paper develops an analogous theory for nontransitive preferences. In particular, the paper identifies a class of complete but not necessary transitive preferences (called regular) which generate demand functions that obey the weak axiom of revealed preference and within which any function obeying the weak axiom can be rationalized. The results of the paper are compared with the previously known ones on this issue.