Welcome to the new version of CaltechAUTHORS. Login is currently restricted to library staff. If you notice any issues, please email coda@library.caltech.edu
Published September 29, 2010 | Accepted Version
Report Open

A Revealed Preference Approach to Computational Complexity in Economics


One of the main building blocks of economics is the theory of the consumer, which postulates that consumers are utility maximizing. However, from a computational perspective, this model is called into question because the task of utility maximization subject to a budget constraint is computationally hard in the worst-case under reasonable assumptions. In this paper, we study the empirical consequences of strengthening consumer choice theory to enforce that utilities are computationally easy to maximize. We prove the possibly surprising result that computational constraints have no empirical consequences whatsoever for consumer choice theory. That is, a data set is consistent with a utility maximizing consumer if and only if a data set is consistent with a utility maximizing consumer having a utility function that can be maximized in strongly polynomial time. Our result motivates a general approach for posing questions about the empirical content of computational constraints: the revealed preference approach to computational complexity. The approach complements the conventional worst-case view of computational complexity in important ways, and is methodologically close to mainstream economics.

Attached Files

Accepted Version - sswp1333.pdf


Files (262.4 kB)
Name Size Download all
262.4 kB Preview Download

Additional details

August 19, 2023
October 20, 2023