This section is intended to provide a bridge between the GARP experiment and the section on Consumer Theory and Revealed Preference. Revealed preference theory is one of the conceptual cornerstones of the economic model of consumer choice. Revealed preference is a technique that has been developed to examine choices made a consumer and determine whether those choices could have come from a utility function with several regularity properties. The GARP experiment provides a technique for generating choice data that can be evaluated using revealed preference theory. The logic of revealed preference is tied closely to several aspects of the economic model of consumer choice, such as a consumer's preferences, and the existence of a utility function that represents preferences. In order to understand the objective of the GARP experiment, and to interpret the result of the experiment, it is helpful to review the consumer demand section. The most important subsections in the Consumer Theory and Revealed Preference section are:
Sections 2 (c) and 2 (e) are more advanced topics, appropriate for advanced undergraduates, and can be skipped without affecting the main ideas in the discussion.
- The Consumer's Budget
- Choices and Preferences
- Choice example
- Derived properties of preferences
- Example of inconsistent choices
- Representation of preferences by a utility function
- Examples of Consistent Choices
- Revealed Preference
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Consumer Theory and Revealed Preference section.