scholarly journals A Comprehensive Approach to Revealed Preference Theory

2017 ◽  
Vol 107 (4) ◽  
pp. 1239-1263 ◽  
Author(s):  
Hiroki Nishimura ◽  
Efe A. Ok ◽  
John K.-H. Quah
Keyword(s):  
Euclidean Space ◽  
Utility Function ◽  
Revealed Preference ◽  
Consumer Theory ◽  
Choice Data ◽  
Preference Theory ◽  
Positive Orthant ◽  
Intertemporal Consumption ◽  
Afriat’S Theorem ◽  
Revealed Preference Theory

We develop a version of Afriat's theorem that is applicable in a variety of choice environments beyond the setting of classical consumer theory. This allows us to devise tests for rationalizability in environments where the set of alternatives is not the positive orthant of a Euclidean space and where the rationalizing utility function is required to satisfy properties appropriate to that environment. We show that our results are applicable, amongst others, to choice data on lotteries, contingent consumption, and intertemporal consumption. (JEL D11, D81)

Inverse problems of demand analysis and their applications to computation of positively-homogeneous Konüs–Divisia indices and forecasting

2016 ◽  
Vol 24 (4) ◽  
Author(s):  
Nikolay I. Klemashev ◽  
Alexander A. Shananin
Keyword(s):  
Utility Function ◽  
A Priori ◽  
Revealed Preference ◽  
Demand Analysis ◽  
Mathematical Programming Problem ◽  
Demand Functions ◽  
Preference Theory ◽  
Homogeneity Property ◽  
Economic Indices ◽  
Revealed Preference Theory

AbstractAccording to Pareto’s theory of consumer demand a rational representative consumer should choose their consumption bundle as the solution of a mathematical programming problem of maximization of the utility function under their budget constraint. The inverse problem of demand analysis is to recover the utility function from the demand functions. The answer to the question of solvability of this problem is based on the revealed preference theory. If the problem is unsolvable, one should apply regularization procedure by introducing irrationality indices. When recovering the utility function one puts a priori requirements on it. In this paper, we suggest including positively-homogeneity property into these requirements. We compare the setups with and without this requirement both theoretically and empirically and provide evidence in favor of requiring this property when computing economic indices for consumer representing consumption behavior of large number of various households for large time intervals.

scholarly journals The Problems of Testing Preference Axioms with Revealed Preference Theory

2004 ◽  
Vol 26 (2) ◽  
Author(s):  
Till Grüne
Keyword(s):  
Revealed Preference ◽  
Test Results ◽  
Choice Data ◽  
Preference Theory ◽  
Laboratory Conditions ◽  
Revealed Preference Theory

AbstractIn economics, it has often been claimed that testing choice data for violation of certain axioms-particularly if the choice data is observed under laboratory conditions-allows conclusions about the validity of certain preference axioms and the neoclassical maximization hypothesis. In this paper I argue that these conclusions are unfounded. In particular, it is unclear what exactly is tested, and the interpretation of the test results are ambiguous. Further, there are plausible reasons why the postulated choice axioms should not hold. Last, these tests make implicit assumptions about beliefs that further blur the interpretations of the results. The tests therefore say little if anything about the validity of certain preference axioms or the maximization hypothesis.

Demand Systems With and Without Errors

2001 ◽  
Vol 91 (3) ◽  
pp. 611-618 ◽  
Author(s):  
Arthur Lewbel
Keyword(s):  
Utility Function ◽  
Error Term ◽  
Sufficient Conditions ◽  
Revealed Preference ◽  
Demand Systems ◽  
Preference Theory ◽  
Demand Models ◽  
Systematic Component ◽  
Necessary And Sufficient ◽  
Revealed Preference Theory

Revealed preference theory assumes that each consumer has demands that are rational, meaning that they arise from the maximization of his or her own utility function. In contrast, econometric or statistical demand models assume that each consumer's demands equal a rational systematic component derived from a common utility function, plus an individual-specific, additive error term. This paper reconciles these differences, by providing necessary and sufficient conditions for rationality of statistical demand models given individual consumer rationality. (JEL D11, D12, C30, C43)

Revealed preference, belief, and game theory

2000 ◽  
Vol 16 (1) ◽  
pp. 99-115 ◽  
Author(s):  
Daniel M. Hausman
Keyword(s):  
Game Theory ◽  
Revealed Preference ◽  
Preference Theory ◽  
Revealed Preference Theory ◽  
Subjective States

The notion of ‘revealed preference’ is unclear and should be abandoned. Defenders of the theory of revealed preference have misinterpreted legitimate concerns about the testability of economics as the demand that economists eschew reference to (unobservable) subjective states. As attempts to apply revealed-preference theory to game theory illustrate with particular vividness, this demand is mistaken.

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