New theory reveals how consumers make choices in unpredictable markets.
The article explores how consumers make choices when faced with uncertainty and multiple options. By introducing the concept of stochastic demand correspondence, the researchers show that consumers can still make rational decisions even when their choices are random. They find that when consumers spend all their money, their behavior follows a principle called stochastic substitutability, leading to important results like Samuelson's Substitution Theorem. This study also confirms key economic principles like the non-positivity of own substitution effect and homogeneity of demand behavior in different scenarios.