MAINTAINING CAPITAL INTACT AND WARP

We consider choice rules that prescribe intertemporal consumption path s which keep capital intact for a standard class of intertemporal allo cation problems. It is shown that the considered rules do not satisfy the Weak Axiom of Revealed Preference in general. Hence, there exists no coherent preference relation (and no social welfare function) on th e set of nonnegative consumption paths which rationalizes the underlyi ng choice behavior in general. If the class of considered allocation p roblems is restricted appropriately, however, 'maintaining capital con stant' (i.e. requiring intertemporal equality of resources) can be sho wn to induce an asymmetric binary relation on the set of nonnegative c onsumption programs. This binary relation can be formalized in an intu itive way. (C) 1998 Elsevier Science B.V. All rights reserved.