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.

Prologue

2018 ◽  
pp. 1-12
Author(s):  
Ivan Moscati
Keyword(s):  
Social Welfare ◽  
Measurement Theory ◽  
Revealed Preference ◽  
Demand Analysis ◽  
Utility Analysis ◽  
Utility Measurement ◽  
Preference Theory ◽  
History Of ◽  
Econometric Approach ◽  
Revealed Preference Theory

The prologue outlines the main passages in the history of utility measurement in economics and presents the four main goals of the book. First, the book reconstructs in detail economists’ ideas and discussions about utility measurement from 1870 to 1985. Second, it brings into focus the interplay between the evolution of utility analysis, economists’ ideas about utility measurement, and their conception of what measurement in general means. Third, it explores the relationships between the history of utility measurement in economics, the history of the measurement of sensations in psychology, and the history of measurement theory in general. Finally, it discusses some epistemological problems related to utility measurement. Not discussed in the book are the measurement of social welfare, revealed preference theory, the post-1950 econometric approach to demand analysis, and the analysis of discrete choices initiated in the 1970s.

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)

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.

scholarly journals Understanding Attitudes towards Proenvironmental Travel: An Empirical Study from Tangshan City in China

2014 ◽  
Vol 2014 ◽  
pp. 1-7 ◽  
Author(s):  
Xiaoping Fang ◽  
Yajing Xu ◽  
Weiya Chen
Keyword(s):  
Travel Behavior ◽  
Mode Choice ◽  
Revealed Preference ◽  
Individual Characteristics ◽  
Survey Method ◽  
Model Parameters ◽  
Travel Mode ◽  
Preference Theory ◽  
Travel Mode Choice ◽  
Revealed Preference Theory

Understanding people’s attitudes towards proenvironmental travel will help to encourage people to adopt proenvironmental travel behavior. Revealed preference theory assumes that the consumption preference of consumers can be revealed by their consumption behavior. In order to investigate the influences on citizens’ travel decision and analyze the difficulties of promoting proenvironmental travel behavior in medium-sized cities in China, based on revealed preference theory, this paper uses the RP survey method and disaggregate model to analyze how individual characteristics, situational factors, and trip features influence the travel mode choice. The field investigation was conducted in Tangshan City to obtain the RP data. An MNL model was built to deal with the travel mode choice. SPSS software was used to calibrate the model parameters. The goodness-of-fit tests and the predicted outcome demonstrate the validation of the parameter setting. The results show that gender, occupation, trip purpose, and distance have an obvious influence on the travel mode choice. In particular, the male gender, high income, and business travel show a high correlation with carbon-intensive travel, while the female gender and a medium income scored higher in terms of proenvironmental travel modes, such as walking, cycling, and public transport.

scholarly journals New Developments in Revealed Preference Theory: Decisions Under Risk, Uncertainty, and Intertemporal Choice

2020 ◽  
Vol 12 (1) ◽  
pp. 299-316 ◽  
Author(s):  
Federico Echenique
Keyword(s):  
Expected Utility ◽  
Intertemporal Choice ◽  
Revealed Preference ◽  
New Developments ◽  
Preference Theory ◽  
Decisions Under Risk ◽  
Discounted Utility ◽  
Recent Developments ◽  
Functional Forms ◽  
Revealed Preference Theory

This article reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments, subjected expected utility and maxmin expected utility in the presence of uncertainty, and exponentially discounted utility for intertemporal choice. The testable implications of these theories for data on choice from classical linear budget sets are described and shown to follow a common thread. The theories all imply an inverse relation between prices and quantities, with different qualifications depending on the functional forms in the theory under consideration.

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