October 12, 2011

The Propensity Function as general formalization of Economic Man/Woman {20}

Working paper at SSRN

Abstract  The present paper demonstrates how the interaction of the structural axiomatic core and the behavioral propensity function produces dynamically stable outcomes in the product market. The propensity function is a compact formal expression of random, semi-random, and deterministic behavioral assumptions. Its two components are direction and magnitude of the rate of change of an elementary axiomatic variable. A type-C propensity function is the formal container for a familiar conception that is known as qualitative prediction. In a random environment, two type-C functions are sufficient to produce stochastic stability and optimality in the product market. The propensity function is truly general.

For the complete set of foundational equations — structural axioms, definitions, and behavioral propensity function — see Wikimedia AXEC61