Subsistence induced and complementarity induced irrelevance in preferences

Mitra, Manipushpak and Sen, Debapriya (2014): Subsistence induced and complementarity induced irrelevance in preferences.

Abstract

In a two-good setting we axiomatize (a) preferences with subsistence consumption and (b) a generalized version of Leontief preferences. Our axiomatization allows for different levels of subsistence and captures the presence of poverty and prosperity. Our axioms are based on the irrelevance of one of the goods at certain consumption bundles. For subsistence, the irrelevance is induced by the subsistence requirement and for generalized Leontief, it is induced by complementarity. We capture this difference using the notion of unhappy sets.

• Item Type: MPRA Paper
• Language: English
• Keywords: Subsistence, irrelevance, unhappy sets, generalized Leontief
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development

References

Fishburn, P.C. 1975. Axioms for lexicographic preferences. Review of Economic Studies 42, 415-419.

Jensen, R.T., Miller, N.H. 2008. Giffen behavior and subsistence consumption. American Economic Review 98, 1553-1577.

Jensen, R.T., Miller, N.H. 2010. Using consumption behavior to reveal subsistence nutrition. Working Paper.

Maskin, E. 1979. Decision-making under ignorance with implications for social choice, Theory and Decision 11, 319-337.

Milnor, J. 1954. Games against nature. In: Decision Processes (R.M. Thrall, C.H. Coombs, R.L. Davis, Eds.), Wiley, New York.

Rebelo, S. 1992. Growth in open economies. Carnegie Rochester Conference Series on Public Policy 36, 5-46.

Rubinstein, A. 2006. Lecture Notes in Microeconomic Theory. Princeton University Press.

Segal, U., Sobel, J. 2002. Min, max, and sum. Journal of Economic Theory 106, 126-150.

Sharif, M. 1986. The concept and measurement of subsistence: a survey of the literature. World Development 14, 555-577.

Steger, T.M. 2000. Economic growth with subsistence consumption. Journal of Development Economics 62, 343-361.

Svedberg, P. 2000. Poverty and Undernutrition. Oxford University Press.

von Neumann, J., Morgenstern, O. 1944. Theory of Games and Economic Behavior. Princeton University Press.