SFB 303 Discussion Paper No. A - 258

Author: Kehoem, Timothy J.
Title: Gross Substitutability and the Weak Axiom of Revealed Preference
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>or=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.
Creation-Date: September 1989
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