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Demand Systems with and without Errors

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Author Info
Arthur Lewbel

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Abstract

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.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 3 (June)
Pages: 611-618
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Handle: RePEc:aea:aecrev:v:91:y:2001:i:3:p:611-618

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Donald J. Brown & Rosa L. Matzkin, 1998. "Estimation of Nonparametric Functions in Simultaneous Equations Models, with an Application to Consumer Demand," Cowles Foundation Discussion Papers 1175, Cowles Foundation, Yale University. [Downloadable!]
  2. Brown, Bryan W & Walker, Mary Beth, 1989. "The Random Utility Hypothesis and Inference in Demand Systems," Econometrica, Econometric Society, vol. 57(4), pages 815-29, July. [Downloadable!] (restricted)
  3. Elbadawi, Ibrahim & Gallant, A Ronald & Souza, Geraldo, 1983. "An Elasticity Can Be Estimated Consistently without A Priori Knowledge of Functional Form," Econometrica, Econometric Society, vol. 51(6), pages 1731-51, November. [Downloadable!] (restricted)
  4. Richard Blundell & Martin Browning & Ian Crawford, 1998. "Nonparametric Engel Curves and Revealed Preference," Discussion Papers 99-07, University of Copenhagen. Department of Economics. [Downloadable!]
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  5. Chiappori, Pierre-Andre & Rochet, Jean-Charles, 1987. "Revealed Preferences and Differentiable Demand: Notes and Comments," Econometrica, Econometric Society, vol. 55(3), pages 687-91, May. [Downloadable!] (restricted)
  6. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September. [Downloadable!] (restricted)
  7. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Walter Beckert & Richard Blundell, 2005. "Heterogeneity and the nonparametric analysis of consumer choice: conditions for invertibility," CeMMAP working papers CWP09/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  2. Thomas F. Crossley & Krishna Pendakur, 2006. "The Social Cost-of-Living: Welfare Foundations and Estimation," Social and Economic Dimensions of an Aging Population Research Papers 155, McMaster University. [Downloadable!]
    Other versions:
  3. Mette Christensen, 2007. "Integrability of Demand Accounting for Unobservable Heterogeneity: A Test on Panel Data," The School of Economics Discussion Paper Series 0713, Economics, The University of Manchester. [Downloadable!]
  4. Arthur Lewbel, 2006. "Modeling Heterogeneity," Boston College Working Papers in Economics 650, Boston College Department of Economics. [Downloadable!]
  5. Richard Blundell & Martin Browning & Ian Crawford, 2005. "Best nonparametric bounds on demand responses," CeMMAP working papers CWP12/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  6. Fève, Frédérique & Fève, Patrick & Florens, Jean-Pierre, 2002. "Attribute Choices and Structural Econometrics of Price Elasticity of Demand," IDEI Working Papers 155, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003. [Downloadable!]
  7. Frederic Vermeulen, 2001. "And the winner is... An empirical evaluation of two competing approaches to household labour supply," Public Economics Working Paper Series ces0123, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics. [Downloadable!]
  8. Arthur Lewbel & Krishna Pendakur, 2006. "Tricks With Hicks: The EASI Demand System," Boston College Working Papers in Economics 651, Boston College Department of Economics, revised 26 Nov 2008. [Downloadable!]
    Other versions:
  9. Richard Blundell & Martin Browning & Ian Crawford, 1997. "Non-parametric Engel curves and revealed preferences," IFS Working Papers W97/14, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
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