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Heuristics for deciding collectively rational consumption behavior

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  • Fabrice Talla Nobibon
  • Laurens Cherchye
  • Bram De Rock
  • Jeroen Sabbe
  • Frits C.R. Spieksma

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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Bibliographic Info

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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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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References

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  1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  2. Martin Browning & Laura Blow, 2006. "Revealed Preference Analysis of Characteristics Models," Economics Series Working Papers 282, University of Oxford, Department of Economics.
  3. Mette Christensen, 2007. "Integrability of demand accounting for unobservable heterogeneity: a test on panel data," IFS Working Papers W07/14, Institute for Fiscal Studies.
  4. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2006. "Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," IZA Discussion Papers 2319, Institute for the Study of Labor (IZA).
  5. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, vol. 77(3), pages 763-799, 05.
  6. Donald J. Brown and Chris Shannon., 1997. "Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets," Economics Working Papers 97-256, University of California at Berkeley.
  7. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2008. "An Afriat Theorem for the Collective Model of Household Consumption," Discussion Paper 2008-72, Tilburg University, Center for Economic Research.
  8. Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2009. "The revealed preference approach to demand," ULB Institutional Repository 2013/132522, ULB -- Universite Libre de Bruxelles.
  9. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September.
  10. Cherchye, L.J.H. & Rock, B. de & Sabbe, J. & Vermeulen, F.M.P., 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure," Discussion Paper 2008-2, Tilburg University, Center for Economic Research.
  11. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 419-25, July.
  12. Starr, Ross M, 1969. "Quasi-Equilibria in Markets with Non-Convex Preferences," Econometrica, Econometric Society, vol. 37(1), pages 25-38, January.
  13. Browning, M. & Chiappori, P.A., 1994. "Efficient Intra-Household allocations: A General Characterization and Empirical Tests," DELTA Working Papers 94-16, DELTA (Ecole normale supérieure).
  14. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  15. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption: A Nonparametric Characterization," Discussion Paper 2004-76, Tilburg University, Center for Economic Research.
  16. repec:eca:wpaper:2008_001 is not listed on IDEAS
  17. Brown, Donald J & Matzkin, Rosa L, 1996. "Testable Restrictions on the Equilibrium Manifold," Econometrica, Econometric Society, vol. 64(6), pages 1249-62, November.
  18. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
  19. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  20. 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.
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Cited by:
  1. Mark Dean & Daniel Martin, 2011. "Testing for Rationality with Consumption Data: Demographics and Heterogeneity," Working Papers 2011-11, Brown University, Department of Economics.
  2. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2011. "Testable implications of general equilibrium models: An integer programming approach," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 564-575.

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