Consumer Decisions and Revealed Preference: Reevaluating Samuelson’s Foundations of Economic Analysis

This chapter discusses consumer decision and revealed preference from many new angles, thus carefully reexamining the foundations of economic analysis. It is Paul A. Samuelson’s contribution that boldly introduced to microeconomic theory the brand-new concept of revealed preference against the then standard doctrine of ordinal utility. The main result of this chapter is that Houthakker’s strong axiom of revealed preference holds if and only if Samuelson’s weak axiom of revealed preference and a certain “regularity condition” newly introduced here both hold. This new equivalence result distinguishes itself from all the previous works in the sense that no continuity assumptions are imposed on the demand function. In the light of uncertainty and behavioral economics in the present times, the significance and limitations of Samuelson-type economics are also discussed. Throughout this research, many graphical illustrations are presented for giving a helping hand to understand mathematical lemmas and theorems.