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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 C.R. Spieksma

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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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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0824.

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Date of creation: Aug 2008
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Handle: RePEc:ete:ceswps:ces0824

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Related research
Keywords: Collective model of household consumption; Collective Axiom of Revealed Preference; Pareto efficiency; Directed graph; Graph coloring; Graph partitioning; Acycli subgraph; Heuristics.;

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  1. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June. [Downloadable!] (restricted)
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  2. Laura Blow & Martin Browning & Ian Crawford, 2008. "Revealed Preference Analysis of Characteristics Models," Review of Economic Studies, Blackwell Publishing, vol. 75(2), pages 371-389, 04. [Downloadable!] (restricted)
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  3. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April. [Downloadable!] (restricted)
  4. Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frederic Vermeulen, 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: an Integer Programming Procedure," ECARES Working Papers 2008_001, Université Libre de Bruxelles, Ecares. [Downloadable!]
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  5. 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. [Downloadable!] (restricted)
  6. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "An Afriat Theorem for the collective model of household consumption," Center for Economic Studies - Discussion papers ces0825, Katholieke Universiteit Leuven, Centrum voor Economische Studiën. [Downloadable!]
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  7. Mette Christensen, 2007. "Integrability of demand accounting for unobservable heterogeneity: a test on panel data," IFS Working Papers W07/14, Institute for Fiscal Studies. [Downloadable!]
  8. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, 03. [Downloadable!] (restricted)
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  9. Donald J. Brown & Chris Shannon, 2000. "Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets," Econometrica, Econometric Society, vol. 68(6), pages 1529-1540, November.
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  10. Mette Christensen, 2007. "Integrability of Demand Accounting for Unobservable Heterogeneity: A Test on Panel Data," The School of Economics Discussion Paper Series 0713, Economics, The University of Manchester. [Downloadable!]
  11. Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
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  12. Brown, Donald J & Matzkin, Rosa L, 1996. "Testable Restrictions on the Equilibrium Manifold," Econometrica, Econometric Society, vol. 64(6), pages 1249-62, November. [Downloadable!] (restricted)
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  13. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January. [Downloadable!] (restricted)
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