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A simplified test for preference rationality of two-commodity choice

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  • Samiran Banerjee

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  • James Murphy

    ()

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    Abstract

    We provide a simplified test to determine if choice data from a two-commodity consumption set satisfies the Generalized Axiom of Revealed Preference (GARP), and thus the preference or utility maximization hypothesis. We construct an algorithm for this test and illustrate its application on experimental choice data. Copyright Springer Science + Business Media, LLC 2006

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    File URL: http://hdl.handle.net/10.1007/s10683-006-4313-6
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    Bibliographic Info

    Article provided by Springer in its journal Experimental Economics.

    Volume (Year): 9 (2006)
    Issue (Month): 1 (April)
    Pages: 67-75

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    Handle: RePEc:kap:expeco:v:9:y:2006:i:1:p:67-75

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    Web page: http://www.springerlink.com/link.asp?id=102888

    Related research

    Keywords: Revealed preference; GARP; Laboratory experiments; Rationality;

    References

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    1. Rosa L. Matzkin & Marcel K. Richter, 1987. "Testing Strictly Concave Rationality," Cowles Foundation Discussion Papers 844, Cowles Foundation for Research in Economics, Yale University.
    2. Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, vol. 107(443), pages 1054-78, July.
    3. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
    4. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
    5. Varian, Hal R., 1988. "Revealed preference with a subset of goods," Journal of Economic Theory, Elsevier, vol. 46(1), pages 179-185, October.
    6. William T. Harbaugh & Kate Krause & Timothy R. Berry, 2001. "GARP for Kids: On the Development of Rational Choice Behavior," American Economic Review, American Economic Association, vol. 91(5), pages 1539-1545, December.
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    Cited by:
    1. Jan Heufer, 2013. "Testing revealed preferences for homotheticity with two-good experiments," Experimental Economics, Springer, vol. 16(1), pages 114-124, March.
    2. Jan Heufer, 2007. "Revealed Preference and the Number of Commodities," Ruhr Economic Papers 0036, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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