(DP 1981-03) The Lexicographic Consumer Theory

Abstract

This paper develops some implications of consumer choice when preferences are lexicographic, by formulating the consumer's choice as a nonlinear programming problem. Under certain conditions, it turns out that some familiar results of standard consumer theory (including the Slutsky equation) have analogues under lexicographic choice. It is suggested that quality variations--where some goods in the consumer's market basket are replaced by similar goods of different quality--find an easier explanation with vector-valued utility.