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Bob is a decision-maker facing a set of outcomes X = {A new car, Caribbean cruise, Superbowl tickets}. Bob's choice rule for different menus or
Bob is a decision-maker facing a set of outcomesX= {A new car, Caribbean cruise, Superbowl tickets}. Bob'schoice rulefor different menus orchoice problemsspecifies the following:
- From the choice problemA1,2 ={A new car, Caribbean cruise},
the choice rule specifiesC(A1,2) ={Caribbean cruise}
- From the choice problemA1,3 = {A new car, Superbowl tickets},
the choice rule specifiesC(A1,3) ={A new car}
- From the choice problemA 2,3 ={Caribbean cruise, Superbowl tickets},
the choice rule specifiesC(A2,3) = C(A2,3)={Caribbean cruise, Superbowl tickets}
- Explain why Bob's choices are not consistent with theWeak Axiom of Revealed Preference (WARP).
- Write down Bob's preference relation based on the choice rule information given above.
- Explain why the preference relation corresponding to Bob's stated choice rule is notrational.
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