A S L 3 Lecture Notes - Lecture 26: Flat Rate, Marginal Utility, Utility
9 Sep 2020
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Online tests test of week 2 open on wednesday morning week 2 introbehecs@ese. eur. nl. Lecture 1 05/03/2019: behavioral economics - insights from psychology, normative vs descriptive: Descriptive describes how people actually behave: utility 1. 0: Measuring utility with self-reported (1-10) answers could be biased. Asking about how much people would pay for something doesn"t work either. Revealed preferences observing choices people make and creating utility function over time: preferences: Weak preference >= strict preference > indifference ~ Transitivity if x>=y and y>=z then x>=z. Completeness you can always prefer one good over the other or if you are indifferent between them. Transitivity + completeness= weak order (book calls it rational but actually weak order is not = rational) Preferences in weak order has to have a utility function (even if it"s very complicated) Reflexivity x is always weakly preferred to itself (z>=x) but an object cannot be strictly preferred to itself (x cannot be > x)
