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Consistent subsets: Computationally feasible methods to compute the Houtman–Maks-index

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  • Heufer, Jan
  • Hjertstrand, Per

Abstract

We provide two methods to compute the largest subset of a set of observations that is consistent with the Generalised Axiom of Revealed Preference. The algorithm provided by Houtman and Maks (1985) is not computationally feasible for larger data sets, while our methods are not limited in that respect. The first method is an application of Gross and Kaiser’s (1996) approximate algorithm and is only applicable for two-dimensional data sets, but it is very fast and easy to implement. The second method is a mixed-integer linear programming approach that is slightly more involved but still fast and not limited by the dimension of the data set.

Suggested Citation

  • Heufer, Jan & Hjertstrand, Per, 2015. "Consistent subsets: Computationally feasible methods to compute the Houtman–Maks-index," Economics Letters, Elsevier, vol. 128(C), pages 87-89.
  • Handle: RePEc:eee:ecolet:v:128:y:2015:i:c:p:87-89
    DOI: 10.1016/j.econlet.2015.01.024
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    References listed on IDEAS

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    1. Syngjoo Choi & Raymond Fisman & Douglas Gale & Shachar Kariv, 2007. "Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty," Economics Working Papers 0076, Institute for Advanced Study, School of Social Science.
    2. Samiran Banerjee & James Murphy, 2009. "A simplified test for preference rationality of two-commodity choice," Experimental Economics, Springer;Economic Science Association, vol. 12(2), pages 252-252, June.
    3. Syngjoo Choi & Raymond Fisman & Douglas Gale & Shachar Kariv, 2007. "Consistency and Heterogeneity of Individual Behavior under Uncertainty," American Economic Review, American Economic Association, vol. 97(5), pages 1921-1938, December.
    4. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    5. Jan Heufer, 2013. "Testing revealed preferences for homotheticity with two-good experiments," Experimental Economics, Springer;Economic Science Association, vol. 16(1), pages 114-124, March.
    6. Heufer, Jan, 2014. "Nonparametric comparative revealed risk aversion," Journal of Economic Theory, Elsevier, vol. 153(C), pages 569-616.
    7. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
    8. Gross, John & Kaiser, Dan, 1996. "Two Simple Algorithms for Generating a Subset of Data Consistent with WARP and Other Binary Relations," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 251-255, April.
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    Cited by:

    1. Matej Opatrny, 2018. "Extent of Irrationality of the Consumer: Combining the Critical Cost Eciency and Houtman Maks Indices," Working Papers IES 2018/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2018.
    2. Jan Heufer & Per Hjertstrand, 2015. "Homothetic Efficiency and Test Power: A Non-Parametric Approach," Tinbergen Institute Discussion Papers 15-064/I, Tinbergen Institute.
    3. Drichoutis, Andreas C. & Nayga, Rodolfo, 2017. "Economic rationality under cognitive load," MPRA Paper 81111, University Library of Munich, Germany.
    4. Jim Engle-Warnick & Natalia Mishagina, 2014. "Insensitivity to Prices in a Dictator Game," CIRANO Working Papers 2014s-19, CIRANO.
    5. repec:eee:jeborg:v:145:y:2018:i:c:p:202-217 is not listed on IDEAS

    More about this item

    Keywords

    Demand theory; Efficiency; Non-parametric analysis; Revealed preference; Utility maximisation;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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