which type of goods maximum utility function represent? I am not sure, which type of goods does the maximum utility function represent i.e., $U(X_1, X_2) =\max(X_1, X_2)$.
As the $U(X_1, X_2) =\min(X_1, X_2)$ represent the complementary goods, and $U(X_1, X_2) =X_1+ X_2$ represent the substitute goods, I think it represents the substitute goods as the maximum of both matter. So am I correct?
Please clarify this doubt, thank you.
$u = \max(x, y)$ represents the preferences over two substitute goods that cannot be consumed together. For example - tea and coffee. In the event that the consumer gets x quantity of tea and y quantity of coffee, consumer choose to consume only one of the them depending on the quantity. He always choose the one that is offered in larger quantity and throws the one that is offered in smaller quantity.