Parametric Recoverability of Preferences
AbstractWe recover approximate parametric preferences from consistent and inconsistent consumer choices. The procedure seeks to utilize revealed preference information contained in choices by minimizing its ranking inconsistency with the proposed parametric preferences. We provide a novel characterization of the Varian Inefficiency Index, generalize it to a goodness-of-fit measure of recovered preferences, and decompose the latter into inconsistency and misspecification measures. This provides a reasonable way to test restrictions on parametric models. An application of the method to the data set constructed by [Kariv2007AER] to study choice under risk suggests more pronounced non-expected utility preferences than previously suggested.
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Bibliographic InfoPaper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number yoram_halevy-2012-20.
Length: 70 pages
Date of creation: 30 Jun 2012
Date of revision: 07 Apr 2014
Contact details of provider:
Web page: http://www.economics.ubc.ca/
Revealed Preference; Recoverability of Preferences; GARP; non-expected utility; risk aversion;
Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-EXP-2012-07-08 (Experimental Economics)
- NEP-UPT-2012-07-08 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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