Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 293: Non Utility Maximizing Behaviour: Probabilistic Choice in a Budget Set “Box”. Properties of Expected Demand Functions

Lars-Göran Larsson ()
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Lars-Göran Larsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: In this paper we use some(even a convex) probabilistic frequency functions in two choice variables defined over the budget set” box” and calculate the expected demand to study its properties The expected demands have own price negativity , are normal goods and are homogeneous of degree zero*. The detailed properties of deterministic demand functions can be replaced with similar properties for some expected demand functions the latter found with fewer and behaviourally less restrictive assumptions. To assume a deterministic utility function to be maximized is more restrictive in a behavioural sense than assuming random choice between some boundaries.

Keywords: Non-maximising behaviour; Bounded rationality; Random choice; Expected demand

JEL-codes: C60; D01; D11

22 pages, March 18, 2008

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