The opportunity criterion: consumer sovereignty without the assumption of coherent preferences

Sugden, Robert (2004) The opportunity criterion: consumer sovereignty without the assumption of coherent preferences. American Economic Review, 94 (4). pp. 1014-1033. ISSN 0002-8282

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Abstract

This paper proposes a formulation of consumer sovereignty, for use in normative economics, which does not presuppose individuals' preferences to be coherent. The fundamental intuition, that opportunity and responsibility have moral value, is formalized as an "opportunity criterion" for assessing resource allocation systems. A model of an exchange economy is presented in which rational arbitrageurs compete to make profits by trading with nonrational consumers. In equilibrium, this economy satisfies the opportunity criterion. One interpretation of this result is that, in a competitive environment, the overall effects of money pumps are benign, even if individuals' preferences are unstable or incoherent.

Item Type: Article
Faculty \ School: Faculty of Social Sciences
Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Groups > Economic Theory
Faculty of Social Sciences > Research Groups > Behavioural Economics
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences
Depositing User: Vishal Gautam
Date Deposited: 01 Sep 2004
Last Modified: 20 Jun 2023 14:42
URI: https://ueaeprints.uea.ac.uk/id/eprint/16593
DOI: 10.1257/0002828042002714

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