Presidential Address: How Revealing Is Revealed Preference?
AbstractThis lecture address the following two key criticisms of the empirical application of revealed preference theory: When the RP conditions do not reject, they do not provide precise predictions; and when they do reject, they do not help characterize the nature of irrationality or the degree/direction of changing tastes. Recent developments in the application of RP theory are shown to have rendered these criticisms unfounded. A powerful test of rationality is available that also provides a natural characterization of changing tastes. Tight bounds on demand responses and on the welfare costs of relative price and tax changes are also available and are shown to work well in practice. (JEL: D11, D12, C14) Copyright (c) 2005 The European Economic Association.
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Bibliographic InfoArticle provided by MIT Press in its journal Journal of the European Economic Association.
Volume (Year): 3 (2005)
Issue (Month): 2-3 (04/05)
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Web page: http://www.mitpressjournals.org/jeea
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
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- Blundell, R. & Browning, M. & Cherchye, L.J.H. & Crawford, I. & Rock, B. de & Vermeulen, F.M.P., 2012.
"Sharp for SARP: Nonparametric Bounds on the Behavioural and Welfare Effects of Price Changes,"
2012-065, Tilburg University, Center for Economic Research.
- Richard BLUNDELL & Martin BROWNING & Laurens CHERCHYE & Ian CRAWFORD & Bram DE ROCK & Frederic VERMEULEN, 2012. "Sharp for SARP: nonparametric bounds on the behavioural and welfare effects of price changes," Center for Economic Studies - Discussion papers ces12.11, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Richard Blundell & Martin Browning & Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2012. "Sharp for SARP: Nonparametric bounds on the behavioural and welfare effects of price changes," IFS Working Papers W12/14, Institute for Fiscal Studies.
- Richard Blundell & Joel Horowitz & Matthias Parey, 2013. "Nonparametric estimation of a heterogeneous demand function under the Slutsky inequality restriction," CeMMAP working papers CWP54/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Michele Lombardi, 2007.
"What Kind of Preference Maximization Does the Weak Axiom of Revealed Non-inferiority Characterize?,"
606, Queen Mary, University of London, School of Economics and Finance.
- Lombardi, Michele, 2010. "What kind of preference maximization does the weak axiom of revealed non-inferiority characterize?," Mathematical Social Sciences, Elsevier, vol. 59(3), pages 323-325, May.
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