revealed preference



  • noun the theory that demand can be calculated from the preferences of customers. These depend on information about the customers’ spending patterns faced with varying income or prices, together with the assumption that customers will act rationally when making the decision to purchase .

Health Economics

  • (written as Revealed Preference)
    A person's (usually marginal) willingness to pay for an entity as revealed by (e.g.) market transactions or a controlled experiment. The emphasis is on the preference being revealed through behaviour in the form of a real act of choice or a hypothetical one rather than mere introspection. The theory of revealed preference is a branch of utility theory in which one entity is either preferred to another or the other is preferred to the one or, in some versions, neither is preferred to the other - ' indifference '. It is concerned less with questions about whether choices actually do reveal preferences (sometimes this is taken axiomatically to be the case) than with building a logical structure of consistent axioms for choice theory and specifically one that yields the implication that an individual's demand curve for any good will have a negative slope.