Gross substitutability and the weak axiom of revealed preference

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Abstract

This paper investigates the relationship between gross substitutability and the weak axiom of revealed preference in excess demand functions. Gross substitutability implies the weak axiom when the number of goods, n, is less than four. There are robust counterexamples to this proposition when n≧4. Nonetheless, Monte Carlo experiments indicate that violations of the weak axiom are extremely rare in functions that satisfy gross substitutability. They also reveal, however, a new class of demand function that violates the weak axiom. These results are of interest because of the close relationship of the weak axiom to uniqueness of equilibrium in production economies.

Original languageEnglish (US)
Pages (from-to)37-50
Number of pages14
JournalJournal of Mathematical Economics
Volume21
Issue number1
DOIs
StatePublished - 1992

Bibliographical note

Funding Information:
*I am grateful to David Levine and Andreu Mas-Cole11 for helpful discussions. An earlier version of this paper was presented at the NBER Conference on Applied General Equilibrium Models held in Stanford, California, April 1986. Financial support has been provided by National Science Foundation Grant SES-85-09484 and SES-87-08616. The final version of this paper was completed while I was a participant in BoWo89, which was supported by Deutsche Forschungsgemeinschaft, Gottfried-Wilhelm-Leibniz-Forderpreis.

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