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Revealed Preference with Limited Consideration

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  • Thomas Demuynck
  • Christian Seel

Abstract

We derive revealed preference tests for models where individuals use consideration sets to simplify their consumption problem. Our basic test provides necessary and sufficient conditions for consistency of observed choices with the existence of consideration set restrictions. The same conditions can also be derived from a model in which the consideration set formation is endogenous and based on subjective prices. By imposing restrictions on these subjective prices, we obtain additional refined revealed preference tests. We illustrate and compare the performance of our tests by means of a dataset on household consumption choices.

Suggested Citation

  • Thomas Demuynck & Christian Seel, 2018. "Revealed Preference with Limited Consideration," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 102-131, February.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:1:p:102-31
    Note: DOI: 10.1257/mic.20150343
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    References listed on IDEAS

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    1. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 176-198.
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    Cited by:

    1. Demuynck, Thomas & Hjertstrand, Per, 2019. "Samuelson's Approach to Revealed Preference Theory: Some Recent Advances," Working Paper Series 1274, Research Institute of Industrial Economics.
    2. Tipoe, Eileen, 2021. "Price inattention: A revealed preference characterisation," European Economic Review, Elsevier, vol. 134(C).
    3. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2018. "Transitivity of preferences: when does it matter?," Theoretical Economics, Econometric Society, vol. 13(3), September.
    4. Eileen Tipoe & Abi Adams & Ian Crawford, 2022. "Revealed preference analysis and bounded rationality [Consume now or later? Time inconsistency, collective choice and revealed preference]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 313-332.
    5. Geng, Sen & Özbay, Erkut Y., 2021. "Shortlisting procedure with a limited capacity," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    6. Geng, Sen, 2022. "Limited consideration model with a trigger or a capacity," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    7. Im, Changkuk & Rehbeck, John, 2022. "Non-rationalizable individuals and stochastic rationalizability," Economics Letters, Elsevier, vol. 219(C).

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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