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Revealed preference tests for weak separability: An integer programming approach

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  • Cherchye, Laurens
  • Demuynck, Thomas
  • De Rock, Bram
  • Hjertstrand, Per

Abstract

We present the revealed preference conditions that characterize the data sets that are consistent with the maximization of a weakly separable utility function. We show that verifying these revealed preference conditions is np-hard. We also present an integer programming approach, which is particularly attractive in view of empirical analysis. We demonstrate the versatility of this integer programming approach by showing that it allows for testing homothetic separability and weak separability of the indirect utility function. We illustrate the practical usefulness of the approach by an empirical application to Spanish household consumption data.

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  • Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & Hjertstrand, Per, 2015. "Revealed preference tests for weak separability: An integer programming approach," Journal of Econometrics, Elsevier, vol. 186(1), pages 129-141.
  • Handle: RePEc:eee:econom:v:186:y:2015:i:1:p:129-141
    DOI: 10.1016/j.jeconom.2014.07.001
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    More about this item

    Keywords

    Weak separability; Revealed preference; Integer programming;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D10 - Microeconomics - - Household Behavior - - - General

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