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from Part I - Trade-Offs and Rationality
Published online by Cambridge University Press: 02 January 2025
This chapter presents an operational test of indifference versus incompleteness. Indifference obtains when two alternatives have the same sets of more preferred and the same sets of less preferred options. This definition turns out to be equivalent to declaring indifference when a trade of alternatives cannot convert a harmless sequence of trades into a sequence that takes an agent from a better to a worse option. Incompleteness obtains when a trade of unranked alternatives makes a harmful sequence of trades possible. The distinction resolves the puzzle that agents frequently cannot strictly rank alternatives even though classical economic theory claims that indifference is rare. When an agent’s preferences are allowed to be incomplete, pairs of alternatives where no preference obtains will abound. Indifference on the other hand nearly disappears.
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