Armstrong's Marginal Preference Theory
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Armstrong's Marginal Preference Theory

Armstrong's Marginal Preference Theory W.E. Armstrong is essentially an orthodox cardinalist and stands in Marshall's tradition. He has forged his own tools to re-establish cardinalism theory is based on two inter-dependent concepts, viz., uncertainty and indifference. We have seen above that the two assumptions on which Neumann Morgenstern's theory is based are: first, the consumer does not regard the object of his choice as 'sure prospects'. Though the nature of the end is certain, one is not certain as to how the end is to be achieved.

Armstrong's Marginal Preference Theory

W.E. Armstrong is essentially an orthodox cardinalist and stands in Marshall's tradition. He has forged his own tools to re-establish cardinalism theory is based on two inter-dependent concepts, viz., uncertainty and indifference.

We have seen above that the two assumptions on which Neumann Morgenstern's theory is based are: first, the consumer does not regard the object of his choice as 'sure prospects'. Though the nature of the end is certain, one is not certain as to how the end is to be achieved. The second assumption is the consumer is not able to discriminate clearly between two otherwise certain distinct ends. It is uncertainty in discernment as distinguished from uncertainty in the prospect of achieving a given economic end which provides a basis of Armstrong's utility theory.

Like Hicks, Armstrong makes use of the concept of indifference which arises from the fact that the consumer is unable to distinguish clearly between the two situations. But, unlike Hicks, his indifference (preference) is not transitive i.e. it cannot be passed from one to the other. For instance, the consumer not be able to distinguish between X and Y or between Y and Z yet difference between X and Z may be quite perceptible.

Thus, Armstrong puts forward his own concept of uncertainty and definition of indifference. Indifference may arise (a) from the principle compensation, i.e., loss in one direction may be compensated by gain in other direction, or (b) from the idea of approximation, i.e. the two situations being approximately the same, the consumer is unable to distinguish between them and is, therefore, indifferent between them. Armstrong's concept of indifference is based on approximation, whereas Hicks's idea is based on the principle of compensation. It will be seen that (a) is the result of weighing and cons and (b) arises from the consumer's inability to see clearly the differ between the two. Hicks's preference implies process of substitution, whereas Armstrong's indifference is the result of low stale of preference.

Armstrong has introduced a concept of 'preference intensity': the intensity may be high, low or imperceptible. According to Armstrong, preference is marginal when the consumer is just able to perceive. This will happen when two situations are so near each other that the consumer is barely able to see that he prefers one to the other. The consumer may not be able to distinguish between these two situations. He will then be in a state of indifference. Thus indifference in Armstrong's definition arises from the approximate identity the two situations. His indifference is due to the triviality of difference between two situations. This relation of indifference will be intransitive, i.e., there will not exist a relation of indifference between two other points.

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