Solutions Manual for ANDREU MAS-GOLELE MICHAEL D. WHINSTON LUO) Lael Chiaki Hara Ilya Segal Steve TadelisCHAPTER 1 L.B.1 Since y > z implies y » 2, the transitivity implies that x » 7 Suppose that z x x. Since y x z. the transitivity then implies that y x x, But this contradicts x > y. Thus we cannot have z > x. Hence x > z. 1.B.2 By the completeness, x > x for every x € X. Hence there is no x © X such that x x ippose that x > y and y > z, then x > y yz By (iii) of Proposition 1.B.1, which was proved in Exercise 1.B.1, we have x > z. Hence > is transitive. Property (i) is now proved. As for (ii), since x x x for every x € X, x ~ x for every x € X as well. ‘Thus ~ is reflexive. Suppose that x ~ y andy ~z Then x¥ryye7%yEX and z x y. By the transitivity, this implies that x x z and z x x. Thus x ~ 2. Hence ~ ie transitive. Suppoce x that ~ y. Then x xy andy yx Thus y x x and x yy. Hence y ~ x. Thus ~ is symmetric Property (ii) is now proved. 1B.3 Let *¢ X and yc X. Since u(+) represents >, x » y if and only if u(x) = uly). Since f(-) is strictly increasing, u(x) = uly) if and only if v(x) = vly). Hence x > y if and only if v(x) = vly). Therefore vi-) represents y. 1.B.4 Suppose first that x > y. If, furthermore, y x x, then x ~ y and hence u(x) = uly). If, on the contrary, we do not have y > x, then x > y. Hence u(x) > u(y). Thus, if x » y, then ule) = uly). Suppose conversely that u(x) = u(y). If. furthermore, u(x) = u(y), then ix y and hence x » y. If, on the contrary, u(x) > uly}, then x > y. and henee x x y. uly), then x x y. So ul+) represents >. 1.B.S. First, we shall prove by induction on the number N of the elements of X that. if there is no indifference between any two different elements of X, then there exists a utility function. If N = 1, there is nothing to prove: Just assign any number to the unique element. So let N > 1 and suppose that the above assertion is true for N - 1. We will show that it is still true for N. Write X = Gy, *y-p%y) By the induction hypothesis, x can be represented by a utility funetion u(-) on the subset (xp.-y_,) - Without loss of generality we can assume that u(x,) > ulx,) >... > ulxy_,) Consider the following three cases: Case 1: For every i < N, x, > Case 2: For every 1 < Ny x, > Hy, Case 3: There exist i < Nand Jj <¢ N such that x, > Hy > x; Since there is no indifference between two different elements, these three cases are are exhaustive and mutually exclusive. We shall now show how the value of ulx,) should be determined, in each of the three cases, for u(-) to represent ¢ on the whole x. If Case 1 applies, then take u(xy) to be larger than u(x,). If Case 2 applies. take ulxy) to he smaller than uly). Suppose now that Case 9 applies. Let I= i ¢ (lu... N- Ih x) > xy,)) and J= Ge ..., N= De Xyu1 > Xj Completeness and the assumption that there is no indifference implies that 1 u J = G,..., N- 1). The transitivity implies that both I and dare “intervals,” in the sense that if i ¢ I and {’ <1, then i’ € 1; and if j€Jand j’ > j, then j © J. Let i* = max I, then i* + 1 = min J. Take