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Lexico PDF
Lexico PDF
Hajime Miyazaki
File Name: lexico95.usc/lexico99.dok
DEPARTMENT OF ECONOMICS
OHIO STATE UNIVERSITY
Fall 1993/1994/1995
Miyazaki.1@osu.edu
This short note discusses a lexicographic preference over two commodity bundles. The extension to the n-commodity case is
straightforward.
Lexicographic Preference
Let a = (a1 , a2 ) and b = (b1 , b2 ) be two consumption
vectors. We say that a is lexicographically preferred to b, and write
a f b if and only if either (a1 > b1 ) or (a1 = b1 and a2 b2 ).
~
From this definition, it follows that a f b if and only if either (a1 >
b1 ) or (a1 = b1 and a2 > b2 ). It is straightforward to verify that the
lexicographic preference is complete, transitive, and reflexive. It is
also convex and strictly monotone. Nevertheless, the lexicographic
preference cannot be represented by a utility function.
An important observation is antisymmetry of the lexicographic
preference. That is, (a b
= {x | x ~ a}
= {x | x = a}
= {a}.
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consumption vector must have its own value, different from all others:
that is, no two points in the plane R2 can have the same value
assigned. But, R2 has a way too many more points than R from which
the numerical values have to be assigned. It is just impossible to
assign different numbers to all points in R2 plane from the real line R.
There will not be enough real numbers assignable to all consumption
vectors. This intuition can be formally validated by a reductio ad
absurdum argument. It will become apparent that the existence of
utility function representation and the existence of non-degenerate
indifference curve are completely synonymous.
The other important property of a lexicographic preference is
that it is not a continuous preference. To see this, check whether the
upper contour set
A(a) = {x | x f a } is closed.
~
a2
a
A(a)
a1
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a. Thus, A(a) is the shaded half-space with the thick vertical half-line
above the a vector included. The upper contour set A(a) is neither
open nor closed.
Since A(a) is not closed, the preference ordering of a
converging sequence can be reversed in the limit. To illustrate,
consider the following sequence.
x ( n) = ( a1 +
1 a2
1
,
+ )
n 2
n
x = ( a1 ,
But, x = ( a1 ,
a2
).
2
a2
) p ( a1 , a 2 ) = a .
2
a2/
2
0
a
x x(n x(2
a a1+(1/2)
x(1
)
a1+1
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x (1)
x ( 2)
x (3)
M
x (n )
M
f
f
f
M
f
M
p a.
a
a
a
M
a
M
and
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Because R(x 1 ) and R( x$1 ) are disjoint, Q(x 1 ) and Q( x$1 ) are
also disjoint. Observe that we can define R(x 1 ) for any nonnegative
real number, and all such R(x 1 )s are disjoint from each other. There
are as many nondegenerate R(x 1 ) intervals as the number of all
nonnegative real numbers. Since each R(x 1 ) contains Q(x 1 ), it
follows that there are as many such Q(x 1 ) sets as the number of all
nonnegative real numbers. Since each Q(x 1 ) contains rational
numbers, the upshot is that the total number of rational numbers
collected over all Q(x 1 )s is at least as great as the number of all
nonnegative real numbers.
u( x$1 ,1)
l
l
l
u(x 1, 1) l
l
R( x$1 ,0)
u( x$1 ,0 )
l
l
R(x 1, 0)
(0, 1)
l
u(x 1, 0)
1
l
( x$1 ,0 )
(x 1, 0)
0
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Lexicographic Preference
Hajime Miyazaki
Representation Function
The absence of a utility function does not imply the absence of
a decision function for a lexicographic consumer. Suppose that a
consumer chooses the most preferred bundle from a budget set of the
form
B(p1 , p2 m) = {(x1, x 2 )
p1 x1 + p2 x2 m} ,
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Hajime Miyazaki
Integer Consumption
The impossibility of utility representation has crucially
depended on the idea that all real vectors were consumption bundles.
If one commodity can only be consumed in nonnegative integer units,
a utility presentation is possible even for the lexicographic consumer.
1
0
a+1
a+2 a+3
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1
2
1
0
1
x2 + 1
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Hajime Miyazaki
u( x1 , x 2 ) = ( x1 +
1
(1 k )
)
.
k
x2 + 1
Then,
x1 u( x1 , ) < x1 +
1
,
k
1
as x 2 . Once again,
k
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Lexicographic Preference
Hajime Miyazaki
1
2
3
0 = u( 0, 0) < u( 0, x 2 ) < u( , ) < u( , ) < u( , )
k
k
k
n
n +1
< L < u( , ) < u(
, ) < L .
k
k
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Lexicographic Preference
Hajime Miyazaki
can chooses any vector on the budget line. The plausibility of such a
lexicographic preference is not eclipsed when the consumers choice
includes three types of apples: red, green and yellow.
In fact, from any consumer that has a continuous preference, I
can create a modified lexicographic preference that behaves in the
identical fashion on every linear budget set except when the original
consumers choice is a demand correspondence, rather than a demand
function1. Let f be an original preference that is continuous in the
~
sense that its upper contour set is closed. Then, induce a modified
lexicographic preference L defined as follows: xLx if and only if
either ( x f x ) or (x x and x 1 > x1) holds. Letting U be a
utility function that represents the continuous preference, we define
xLx if and only if either U(x) > U(x) or ( U(x) = U(x) and x 1 >
x1) holds. For example, by this method, a Cobb-Douglas utility
function can be modified into a Cobb-Douglas type lexicographic
preference.
Expenditure Minimization
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Lexicographic Preference
Hajime Miyazaki
If we redefine the expenditure function as the infimum, rather than the minimum, expenditure,
then we have it well-defined. e(p, xo) = inf{p x | x f xo} = p 1 xo1 for all nonnegative xo. But,
the preference still fails to have any utility function representation. In this sense, I consider the
infimum version an isolated technical remedy, and prefer using the minimum definition to
underscore the economic-theoretic underpinning of the relations among preference, demand and
utility function.
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Lexicographic Preference
Hajime Miyazaki