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This note explains the equivalence between approximate rationalizability and approximate cost-rationalizability within the context of consumer demand. In connection with these results, we interpret Afriat’s (1973) critical cost efficiency index (CCEI) as a measure of cost (in)efficiency, in the sense that a consumer is spending more money than is required to achieve her utility targets.
Authors
![Matthew Polisson](/sites/default/files/styles/square_desktop/public/2022-05/Matthew_Polisson.jpg?itok=qIHlcqdm)
Research Associate University of Leicester
Professor of Economics at the University of Leicester. His research interests are in applied microeconomics and microeconomic theory.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
John Quah
Working Paper details
- DOI
- 10.1920/wp.ifs.2022.0422
- Publisher
- Institute for Fiscal Studies
Suggested citation
Polisson, M and Quah, J. (2022). Rationalizability, cost-rationalizability, and Afriat’s efficiency index. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/rationalizability-cost-rationalizability-and-afriats-efficiency-index (accessed: 30 June 2024).
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