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Heuristics for Deciding Collectively Rational Consumption Behavior

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Author Info

  • Fabrice Talla Nobibon

    ()

  • Laurens Cherchye

    ()

  • Bram De Rock

    ()

  • Jeroen Sabbe

    ()

  • Frits Spieksma

    ()

Abstract

We consider the computational problem of testing whether observed household consumption behavior satisfies the Collective Axiom of Revealed Preferences (CARP). We propose a graph such that the existence of a node-partitioning giving rise to two induced subgraphs that are acyclic implies that the data satisfy CARP. Furthermore, we propose and implement heuristics that are quite fast, that can be used to check reasonably large datasets for CARP and that can be of particular interest when used prior to computationally demanding approaches. Finally, from the computational results we conclude that these heuristics can be effective in testing CARP.

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Bibliographic Info

Article provided by Society for Computational Economics in its journal Computational Economics.

Volume (Year): 38 (2011)
Issue (Month): 2 (August)
Pages: 173-204

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Handle: RePEc:kap:compec:v:38:y:2011:i:2:p:173-204

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Web page: http://www.springerlink.com/link.asp?id=100248
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Related research

Keywords: Collective axiom of revealed preference; Pareto efficiency; Directed graph; Graph coloring; Heuristics; NP-complete;

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References

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  1. Donald J. Brown & Chris Shannon, 1998. "Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets," GE, Growth, Math methods, EconWPA 9802003, EconWPA, revised 02 Mar 1998.
  2. Laura Blow & Martin Browning & Ian Crawford, 2005. "Revealed preference analysis of characteristics models," School of Economics Discussion Papers, School of Economics, University of Surrey 0305, School of Economics, University of Surrey.
  3. Cherchye, Laurens & De Rock, Bram & Sabbe, Jeroen & Vermeulen, Frederic, 2008. "Nonparametric tests of collectively rational consumption behavior: An integer programming procedure," Journal of Econometrics, Elsevier, Elsevier, vol. 147(2), pages 258-265, December.
  4. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2006. "Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," IZA Discussion Papers 2319, Institute for the Study of Labor (IZA).
  5. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, Econometric Society, vol. 66(6), pages 1241-1278, November.
  6. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2010. "An Afriat theorem for the collective model of household consumption," ULB Institutional Repository 2013/131711, ULB -- Universite Libre de Bruxelles.
  7. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  8. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, Econometric Society, vol. 75(2), pages 553-574, 03.
  9. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 63-90, January.
  10. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, Econometric Society, vol. 77(3), pages 763-799, 05.
  11. Carvajal, Andres & Ray, Indrajit & Snyder, Susan, 2004. "Equilibrium behavior in markets and games: testable restrictions and identification," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 1-40, February.
  12. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
  13. Donald J. Brown & Rosa L. Matzkin, 1995. "Testable Restrictions on the Equilibrium Manifold," Cowles Foundation Discussion Papers 1109, Cowles Foundation for Research in Economics, Yale University.
  14. Mette Christensen, 2007. "Integrability of Demand Accounting for Unobservable Heterogeneity: A Test on Panel Data," The School of Economics Discussion Paper Series, Economics, The University of Manchester 0713, Economics, The University of Manchester.
  15. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 945-73, July.
  16. Starr, Ross M, 1969. "Quasi-Equilibria in Markets with Non-Convex Preferences," Econometrica, Econometric Society, Econometric Society, vol. 37(1), pages 25-38, January.
  17. Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2009. "The revealed preference approach to demand," ULB Institutional Repository 2013/132522, ULB -- Universite Libre de Bruxelles.
  18. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(3), pages 419-25, July.
  19. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September.
  20. repec:eca:wpaper:2008_001 is not listed on IDEAS
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Citations

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Cited by:
  1. Laurens CHERCHYE & Thomas DEMUYNCK & Bram DE ROCK, 2009. "Testable implications of general equilibrium models: an integer programming approach," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces09.14, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Mark Dean & Daniel Martin, 2011. "Testing for Rationality with Consumption Data: Demographics and Heterogeneity," Working Papers 2011-11, Brown University, Department of Economics.

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