Changing Tastes and Effective Consistency

• Autores: Larry Selden, Xiao Wei
• Localización: Economic journal, ISSN 0013-0133, Vol. 126, Nº 595, 2016, págs. 1912-1946
• Idioma: inglés
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• Resumen

  • In a single commodity setting with changing tastes, an individual's consumption plan can be obtained using naïve or sophisticated choice. We provide two sufficient conditions for when the solutions are unique and agree and the common plan is representable by a non-changing tastes utility. Because the solution is not revised over time, the plan and associated preferences are referred to as being effectively consistent. Afriat-style revealed preference tests are derived. The assumption of effective consistency can mitigate the problems of vulnerability to Dutch Books, non-existence of a competitive equilibrium and the aggregation of heterogeneous agents with changing tastes. [ABSTRACT FROM AUTHOR]