How Demanding Is the Revealed Preference Approach to Demand?
A well-known problem with revealed preference methods is that when data are found to satisfy their restrictions it is hard to know whether this should be viewed as a triumph for economic theory, or a warning that these conditions are so undemanding that almost anything goes. This paper allows researchers to make this distinction. Our approach uses an axiomatic characterization of a measure of predictive success due to Selten (1991). We illustrate the idea using a panel dataset. The results show that this approach can lead us to radically reassess our view of the empirical performance of economic theory. (JEL D11, D12)
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Volume (Year): 101 (2011)
Issue (Month): 6 (October)
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References listed on IDEAS
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.:
- Laura Blow & Martin Browning & Ian Crawford, 2008.
"Revealed Preference Analysis of Characteristics Models,"
Review of Economic Studies,
Oxford University Press, vol. 75(2), pages 371-389.
- Laura Blow & Martin Browning & Ian Crawford, 2005. "Revealed preference analysis of characteristics models," CAM Working Papers 2005-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- Laura Blow & Martin Browning & Ian Crawford, 2005. "Revealed preference analysis of characteristics models," School of Economics Discussion Papers 0305, School of Economics, University of Surrey.
- Martin Browning & Laura Blow, 2006. "Revealed Preference Analysis of Characteristics Models," Economics Series Working Papers 282, University of Oxford, Department of Economics.
- Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
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- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A nonparametric characterization," ULB Institutional Repository 2013/98559, ULB -- Universite Libre de Bruxelles.
- Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2007. "The collective model of household consumption : A nonparametric characterization," Other publications TiSEM 0a104373-4fb6-4ef2-9d2b-2, Tilburg University, School of Economics and Management.
- Bronars, Stephen G, 1987. "The Power of Nonparametric Tests of Preference Maximization [The Nonparametric Approach to Demand Analysis]," Econometrica, Econometric Society, vol. 55(3), pages 693-698, May.
- Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
- M. Keith Chen & Venkat Lakshminarayanan & Laurie R. Santos, 2006. "How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 517-537, June.
- W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
- Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
- Famulari, Melissa, 1995. "A Household-Based, Nonparametric Test of Demand Theory," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 372-382, May.
- Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, vol. 107(444), pages 1431-1444, September.
- Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458. Full references (including those not matched with items on IDEAS)
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