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Goods Versus Characteristics: Dimension Reduction and Revealed Preference

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  • Matthew Polisson

Abstract

This paper compares the goods and characteristics models of the consumer within a non-parametric revealed preference framework. Of primary interest is to make a comparison on the basis of predictive success that takes into account dimension reduction. This allows us to nonparametrically identify the model which best fits the data. We implement these procedures on household panel data from the UK milk market. The primary result is that the better fit of the characteristics model is entirely attributable to dimension reduction.

Suggested Citation

  • Matthew Polisson, 2011. "Goods Versus Characteristics: Dimension Reduction and Revealed Preference," Discussion Papers in Economics 11/44, Division of Economics, School of Business, University of Leicester, revised Dec 2011.
    • Handle: RePEc:lec:leecon:11/44
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    References listed on IDEAS

    as
    1. Laura Blow & Martin Browning & Ian Crawford, 2008. "Revealed Preference Analysis of Characteristics Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(2), pages 371-389.
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    5. Matthew Polisson & John K.-H. Quah, 2013. "Revealed Preference in a Discrete Consumption Space," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 28-34, February.
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    More about this item

    Keywords

    Characteristics; demand; dimension reduction; nested models; revealed preference;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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