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The Revealed Preference Theory of Changing Tastes

Faruk Gul and Wolfgang Pesendorfer
The Review of Economic Studies
Vol. 72, No. 2 (Apr., 2005), pp. 429-448
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/3700658
Page Count: 20
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The Revealed Preference Theory of Changing Tastes
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Abstract

We analyse preferences over finite decision problems in order to model decision-makers with "changing tastes". We provide conditions on these preferences that identify the Strotz model of consistent planning. Building on an example given by Peleg and Yaari (1973), we show that for problems with infinitely many choices, Strotz's representation of preferences may not be well defined. For that case, we propose a well-defined approximation which is empirically indistinguishable from the Strotz preference that is being approximated.

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