EC 501/Zenginobuz Fall 2021

Problem Set #2
Due 10:00, Nov 4, 2021
1.
a) A consumer likes sugar in her coffee, but she simply cannot taste the difference between a cup of coffee
with n grams of sugar in it and a cup of coffee with n + 1 grams. Suppose a teaspoon of sugar is 6 grams,
and suppose she takes her coffee with one teaspoon of sugar. Why does this violate transitivity?
b) Consider a committee of three people acting together as a “consumer” (groups of people often act
together as “consumers.”) The committee makes decisions using majority voting. When the committee
members compare two alternatives, x and y, they simply take a vote, and the winner is said to be
“preferred” by the committee to the loser. Suppose that the preferences of the individuals are as follows:
Person 1 likes x best, y second best, and z third best: x ≻1 y ≻1 z. Assume the preferences of the other
two people are: Person 2: y ≻2 z ≻2 x; and Person 3: z ≻3 x ≻3 y . Show that in this example the committee
preferences produced by majority voting violate transitivity. (This is the famous “voting paradox” first
described by the French philosopher and mathematician Marquis de Condorcet (1743–1794).)

2. Show that if a preference relation Ri is transitive in the sense that xRi y and yRi z implies xRi z
for all x, y, and z, then

a) xPi y and yPi z implies xPi z ;

b) xPi y and yI i z implies xPi z ;
c) xI i y and yPi z implies xPi z ;
d) xI i y and yI i z implies xI i z .

(Note: “R” is “at least as good as”; “P” is “strictly better than”; “I” is “indifferent to” relations we
defined in class)

3. Two friends, Larry and Moe, wish to go on vacation together. Individually, they are standard
preference maximizers _-their preferences ≽#$%%& and ≽'() are complete and transistive. They
attempt to form a joint preference relation as follows:
* ≽∗ , if x≽#$%%& , or * ≽'() ,
That is, they jointly prefer x to y if either Larry or Moe prefers x to y. Prove that ≽∗ is complete.
Show by example that it may not be transitive.

4.

5.