506. The Impossibility of Rational Consumer Choice: A Clarifying Note

Brendan Markey-Towler, School of Economics Discussion Paper No. 506 December 2013, School of Economics, The University of Queensland .

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Abstract

Kapeller et al. [2012] argue that consumer choice in the presence of multiple- attribute products is structurally equivalent to the social choice problem to which Arrow's famed impossibility theorem applies and that therefore rational consumer choice is impossible. While I do not deny rational choice is impossible in reality, I find this particular theoretical argument against a rational agent model to be, unfortunately, based on an erroneous assertion of equivalence. I demonstrate that the mathematical structure of the consumer choice problem is not equivalent to the social choice problem, and that as a result we cannot apply the Arrow impossibility theorem to the former problem in the manner that the authors do.