Is Utility Transferable? A Revealed Preference Analysis
AbstractWe provide a revealed preference analysis of the transferable utility hypothesis, which is widely used in economic models. First, we establish revealed preference conditions that must be satisfied for observed group behavior to be consistent with Pareto efficiency under transferable utility. Next, we show that these conditions are easily testable by means of integer programming methods. The tests are entirely nonparametric, which makes them robust with respect to specification errors. Finally, we demonstrate the practical usefulness of our conditions by means of an application to Spanish consumption data. To the best of our knowledge, this is the first empirical test of the transferable utility hypothesis.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-018.
Date of creation: 2011
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Web page: http://center.uvt.nl
transferable utility hypothesis; generalized quasi-linearity; nonparamet- ric tests; revealed preferences;
Other versions of this item:
- Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2011. "Is utility transferable? A revealed preference analysis," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/297607, Katholieke Universiteit Leuven.
- Laurens CHERCHYE & Thomas DEMUYNCK & Bram DE ROCK, 2011. "Is utility transferable? A revealed preference analysis," Center for Economic Studies - Discussion papers ces11.02, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-EVO-2011-04-09 (Evolutionary Economics)
- NEP-UPT-2011-04-09 (Utility Models & Prospect Theory)
You can help add them by filling out this form.
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