Just-noticeable difference as a behavioural foundation of the critical cost-efficiency index

Dziewulski, Pawel (2020) Just-noticeable difference as a behavioural foundation of the critical cost-efficiency index. Journal of Economic Theory, 188. a105071. ISSN 0022-0531

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Abstract

Despite its ad hoc nature and lack of an appealing economic interpretation, the critical cost-efficiency index (or CCEI) proposed in Afriat (1973) is one of the most widespread measures of departures from rationality. In this paper, we provide a behavioural foundation for this index by showing that it is equivalent to a notion of the just-noticeable difference — a measure of dissimilarity between alternatives that is sufficient for the agent to tell them apart.

Item Type: Article
Keywords: Utility maximisation, Generalised axiom of revealed preference, Critical cost-efficiency index, Interval order, Just-noticeable difference
Schools and Departments: University of Sussex Business School > Economics
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Date Deposited: 18 May 2020 07:20
Last Modified: 18 May 2020 10:45
URI: http://sro.sussex.ac.uk/id/eprint/91281

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