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A Simplified Test for Preference Rationality of Two-commodity Choice

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  • Shomu Banerjee
  • James H. 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.

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    File URL: http://economics.emory.edu/home/assets/workingpapers/banerjee_04_21_paper.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0421.

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    Date of creation: Dec 2004
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    Handle: RePEc:emo:wp2003:0421

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    1. Matzkin, Rosa L. & Richter, Marcel K., 1991. "Testing strictly concave rationality," Journal of Economic Theory, Elsevier, vol. 53(2), pages 287-303, April.
    2. Varian, Hal R., 1988. "Revealed preference with a subset of goods," Journal of Economic Theory, Elsevier, vol. 46(1), pages 179-185, October.
    3. Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, vol. 107(443), pages 1054-78, July.
    4. 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.
    5. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
    6. James Andreoni, 2001. "Giving According to GARP," Theory workshop papers 339, UCLA Department of Economics.
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