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A revealed preference test of rationing

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  • Fleissig, Adrian R.
  • Whitney, Gerald

Abstract

This paper derives a revealed preference test for utility maximization under rationing and can detect, for which goods rationing is binding without specifying a functional form or imposing rationing constraints prior to estimation. For UK data from 1920–55, we find evidence of utility maximization under rationing with rationing binding for food and other services. Estimated virtual prices exceed observed food prices by 16.5% in 1947 and observed prices of other services by 10.9% in 1952.

Suggested Citation

  • Fleissig, Adrian R. & Whitney, Gerald, 2011. "A revealed preference test of rationing," Economics Letters, Elsevier, vol. 113(3), pages 234-236.
  • Handle: RePEc:eee:ecolet:v:113:y:2011:i:3:p:234-236
    DOI: 10.1016/j.econlet.2011.07.020
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    References listed on IDEAS

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    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
    3. Fleissig, Adrian R. & Whitney, Gerald A., 2005. "Testing for the Significance of Violations of Afriat's Inequalities," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 355-362, July.
    4. Mackay, Robert J & Whitney, Gerald A, 1980. "The Comparative Statics of Quantity Constraints and Conditional Demands: Theory and Applications," Econometrica, Econometric Society, vol. 48(7), pages 1727-1744, November.
    5. Jones, Barry E. & De Peretti, Philippe, 2005. "A Comparison Of Two Methods For Testing The Utility Maximization Hypothesis When Quantity Data Are Measured With Error," Macroeconomic Dynamics, Cambridge University Press, vol. 9(05), pages 612-629, November.
    6. Sonya Kostova Huffman & Stanley R. Johnson, 2004. "Impacts of Economic Reform in Poland: Incidence and Welfare Changes Within a Consistent Framework," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 626-636, May.
    7. Philippe De Peretti, 2005. "A Comparison Of Two Methods For Testing The Utility Maximization Hypothesis When Quantity Data Are Measured With Error," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00646809, HAL.
    8. E. Rothbarth, 1941. "The Measurement of Changes in Real Income under Conditions of Rationing," Review of Economic Studies, Oxford University Press, vol. 8(2), pages 100-107.
    9. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    10. Swofford, James L. & Whitney, Gerald A., 1994. "A revealed preference test for weakly separable utility maximization with incomplete adjustment," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 235-249.
    11. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
    12. J. R. Hicks, 1943. "The Four Consumer's Surpluses," Review of Economic Studies, Oxford University Press, vol. 11(1), pages 31-41.
    13. Fleissig, Adrian R & Whitney, Gerald A, 2003. "A New PC-Based Test for Varian's Weak Separability Conditions," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 133-144, January.
    14. Bettendorf, Leon & Buyst, Erik, 1997. "Rent Control and Virtual Prices: A Case Study for Interwar Belgium," The Journal of Economic History, Cambridge University Press, vol. 57(03), pages 654-673, September.
    15. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
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    Citations

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    Cited by:

    1. Fleissig, Adrian R. & Whitney, Gerald, 2013. "Virtual prices and the impact of house rationing in Belgium on consumer choices," Explorations in Economic History, Elsevier, vol. 50(2), pages 308-315.
    2. Fleissig, Adrian R. & Whitney, Gerald A., 2015. "Belgium relief fund, post war food shortages and the “True” cost of living," Explorations in Economic History, Elsevier, vol. 58(C), pages 93-106.
    3. Fleissig, Adrian R. & Whitney, Gerald A., 2015. "A revealed preference test of rationing a Monte Carlo analysis," Economic Modelling, Elsevier, vol. 45(C), pages 207-211.

    More about this item

    Keywords

    Afriat Inequalities; Generalized axiom of revealed preference; Rationing;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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