On the Role of Complete, Transitive Preferences in Equilibrium Theory

Abstract

Most of modern economic equilibrium analysis has as one of its components the “rational consumer”. The rational consumer is assumed to have an ordering on all possible states of the world so that given two such states he will either be able to select the one he prefers or else express indifference between them. Further his preferences are supposed to display consistency by being transitive. Judged by these standards it seems that few real people would pass the rationality test, for it is easy to think of situations in which people deliberately avoid making decisions, say, on a future course of action because they have no clearly felt preference (e.g. to go on a picnic next Sunday, or stay home and watch a televised football game).