Preference

For other uses, see Preference (disambiguation).

Preference (also called "taste" or "penchant") is a concept, used in the social sciences, particularly economics. Taste in the general sense is the same as Preference. Taste is also a sociological concept in that it is not just personal but subject to Social pressures The social sciences comprise academic disciplines concerned with the study of the social life of human groups and individuals including Anthropology, Communication studies Economics is the social science that studies the production distribution, and consumption of goods and services. It assumes a real or imagined "choice" between alternatives and the possibility of rank ordering of these alternatives, based on happiness, satisfaction, gratification, enjoyment, utility they provide. Happiness is an Emotion associated with feelings ranging from contentment and satisfaction to Bliss and intense Joy. Gratification is the positive emotional response ( Happiness) to a fulfillment of desire In Economics, utility is a measure of the relative satisfaction from or desirability of Consumption of various Goods and services. More generally, it can be seen as a source of motivation. Motivation is the reason or reasons for engaging in a particular behavior especially Human behavior as studied in Philosophy, Conflict, Economics In cognitive sciences, individual preferences enable choice of objectives/goals.

Also, more consumption of a normal good is generally (but not always) assumed to be preferred to less consumption.

1 Preference in economics
2 Notation
3 References
4 See also
5 External links

Preference in economics

In microeconomics, preferences of consumers and other entities are modelled with preference relations. Microeconomics is a branch of Economics that studies how individuals households and firms and some states make decisions to allocate limited resources typically in markets

Let S be the set of all "packages" of goods and services (or more generally "possible worlds"). Then ≤ is a preference relation on S if it is a binary relation on S such that a ≤ b if and only if b is at least as preferable as a. In Mathematics, a binary relation (or a dyadic or 2-place relation) is an arbitrary association of elements within a set or with elements of It is conventional to say "b is weakly preferred to a", or just "b is preferred to a". If a ≤ b but not b ≤ a, then the consumer strictly prefers b to a, which is written a < b. If a ≤ b and b ≤ a then the consumer is indifferent between a and b. Strict weak ordering|Total_preorders|weak order (or total preorder)}}.

Completeness is more philosophically questionable. In most applications, S is an infinite set and the consumer is not conscious of all preferences. For example, one does not have to make up one's mind about whether one prefers to go on holiday by plane or by train if one does not have enough money to go on holiday anyway (although it can be nice to dream about what one would do if one would win the lottery). However, preference can be interpreted as a hypothetical choice that could be made rather than a conscious state of mind. In this case, completeness amounts to an assumption that the consumer can always make up their mind whether they are indifferent or prefer one option when presented with any pair of options.

Behavioral economics investigates the circumstances when human behavior is consistent and inconsistent with these assumptions. Behavioral economics and behavioral finance are closely related fields which apply scientific research on human and social cognitive and emotional factors to better

The indifference relation ~ is an equivalence relation. In Mathematics, an equivalence relation is a Binary relation between two elements of a set which groups them together as being "equivalent" Thus we have a quotient set S/~ of equivalence classes of S, which forms a partition of S. In Mathematics, given a set X and an Equivalence relation ~ on X, the equivalence class of an element a in X In Mathematics, given a set X and an Equivalence relation ~ on X, the equivalence class of an element a in X In Mathematics, a partition of a set X is a division of X into non-overlapping " parts " or " blocks " Each equivalence class is a set of packages that is equally preferred. If there are only two commodities, the equivalence classes can be graphically represented as indifference curves. In Microeconomic theory, an indifference curve is a graph showing different bundles of goods, each measured as to quantity between which a consumer Based on the preference relation on S we have a preference relation on S/~. As opposed to the former, the latter is antisymmetric and a total order. In Mathematics, a Binary relation R on a set X is antisymmetric if for all a and b in X, if In Mathematics and Set theory, a total order, linear order, simple order, or (non-strict ordering is a Binary relation

It is usually more convenient to describe a preference relation on S with a utility function $u : S \rightarrow \textbf R$ , such that u(a) ≤ u(b) if and only if a ≤ b. In Economics, utility is a measure of the relative satisfaction from or desirability of Consumption of various Goods and services. ↔ A continuous utility function always exists if ≤ is a continuous rational preference relation on $R n$ . In Mathematics, a continuous function is a function for which intuitively small changes in the input result in small changes in the output For any such preference relation, there are many continuous utility functions that represent it. Conversely, every utility function can be used to construct a unique preference relation.

All the above is independent of the prices of the goods and services and independent of the budget of the consumer. These determine the feasible packages (those he or she can afford). In principle the consumer chooses a package within his or her budget such that no other feasible package is preferred over it; the utility is maximized.

Notation

Sometimes symbols like $\prec \succ \precsim \succsim \sim$ are used as a reminder that equivalence is not necessarily equality.

References

Kreps, David (1990). A Course in Microeconomic Theory. New Jersey: Princeton University Press. ISBN 0-691-04264-0
Mas-Colell, Andreu; Whinston, Michael; & Green, Jerry (1995). Microeconomic Theory. Oxford: Oxford University Press. ISBN 0-19-507340-1

External links

Stanford Encyclopedia of Philosophy article on 'Preferences'
Customer preference formation (white paper from ICR)

Pairwise comparison generally refers to any process of comparing entities in pairs to judge which of each pair is preferred, or has a greater amount of some Quantitative Revealed preference theory, pioneered by American Economist Paul Samuelson, is a method by which it is possible to discern the best possible option on the In Social choice theory, Arrow’s impossibility theorem, or Arrow’s paradox, demonstrates that no voting system can convert the ranked preferences of individuals Behavioral economics and behavioral finance are closely related fields which apply scientific research on human and social cognitive and emotional factors to better The subjective theory of value (or theory of subjective value) is an economic theory of value that holds that "to possess value an object must be both useful Envy (also called invidiousness) may be defined as an Emotion that "occurs when a person lacks another’s superior quality achievement or possession and Greed is the Selfish desire for or pursuit of Money, Wealth, power, Food, or other Possessions, especially when this denies Hope is a Belief in a positive outcome related to events and Circumstances in one's life Lexicographic preferences ( Lexicographical order based on the order of amount of each good describe comparative preferences where an economic agent infinitely Motivation is the reason or reasons for engaging in a particular behavior especially Human behavior as studied in Philosophy, Conflict, Economics This article is about voting systems that use ranked ballots For alternative meanings see Preferential voting (disambiguation. Higher-order volitions (or higher-order desire) as opposed to action-determining volitions are volitions about volitions Libido in its common usage means Sexual desire however more technical definitions such as those found in the work of Carl Jung, are more general referring to libido Sexual orientation is believed to refer to "an enduring pattern of emotional romantic and/or sexual attractions to men women or both sexes In Mathematics, especially Order theory, a strict weak ordering is a Binary relation S that is a strict partial order In Economics, time preference (or "discounting" pertains to how large a premium a consumer will place on enjoyment nearer in time over more remote enjoyment Preference regression is a statistical technique used by marketers to determine consumers’ Preferred core benefits In Industrial design, product developers must choose numerous lengths distances diameters volumes and other characteristic quantities.

Dictionary

-noun

The selection of one thing or person over others.
The option to so select, and the one selected.
The state of being preferred over others.
A strong liking or personal valuation.
A preferential bias; partiality; discrimination.

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