Laura Blow () (Institute for Fiscal Studies) Martin Browning () (Institute for Fiscal Studies and Nuffield College, Oxford) Ian Crawford () (Institute for Fiscal Studies and University of Oxford)
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Characteristics models have been found to be useful in many areas of economics. However, their empirical implementation tends to rely heavily on functional form assumptions. In this paper we develop a revealed preference-based nonparametric approach to characteristics models. We derive the minimal necessary and sufficient empirical conditions under which data on the market behaviour of individual, heterogeneous, pricetaking consumers are nonparametrically consistent with the consumer characteristics model. Where these conditions hold, we show how information may be recovered on individual consumer's marginal valuations of product attributes. In some cases marginal valuations are point identi- fied and in other cases we can only recover bounds. Where the conditions fail we highlight the role which the introduction of unobserved product attributes can play in rationalising the data. We implement these ideas using consumer panel data on the Danish milk market.
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Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number
CWP18/04.
Length: Date of creation: Dec 2004 Date of revision: Handle: RePEc:ifs:cemmap:18/04
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Find related papers by JEL classification: C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
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