BAI 30548 - Problem set 1

Due: Oct 6, by 18:00

1. Consider a preference % on R2++ , defined by

x%y ⇐⇒ max {x1 , x2 } ≥ max {y1 , y2 } and x1 + x2 ≥ y1 + y2 .

(a) What are  and ∼?

(b) Is this preference complete? Transitive? Explain.

(c) Is this preference strictly monotone? Explain.

(d) Is this preference convex? Affine? Explain.

2. Consider a Lexicographic preference % on R2 , defined by

x%y ⇐⇒ x1 > y1 or (x1 = y1 and x2 ≥ y2 )

Show that Lexicographic preference is weak order and antisymmetric.

3. Consider a choice correspondence C : D ⇒ X, need not be rational, defined by

C (X) = {x ∈ X : u (x) + 1 ≥ u (y) ∀y ∈ X \ {x}}

where u : X → R is a real-valued function.

Does C satisfies the following two conditions? If so, prove it. If not, give a counter example.

(a) For each X, Y ∈ D, if x ∈ X ⊆ Y and x ∈ C (Y ), then x ∈ C (X).

(b) For each X, Y ∈ D, if x, y ∈ C (X), X ⊆ Y and y ∈ C (Y ), then x ∈ C (Y ).

4. Prove the following result.

Proposition 1 Let % be a weak order and X =X∈D X. For X ∈ D, we have X  Y for all
Y ∈ D if and only if there exists x ∈ σ (X) such that x % z for all z ∈ X.1

1
Here X∈D X is the collection of alternatives that are object of choice in some choice set in D. When X =X∈D X,
all alternatives have that property.