A revealed preference analysis of the rational addiction model
AbstractWe provide a revealed preference analysis of the rational addiction model. The revealed preference approach avoids the need to impose an, a priori unverifiable, functional form on the underlying utility function. Our results extend the previously established revealed preference characterizations for the life cycle model and the one-lag habits model. We show that our characterization is easily testable by means of linear programming methods and we demonstrate its practical usefulness by means of an application to Spanish household consumption data.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces11.12.
Date of creation: May 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
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