IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v169y2017icp546-550.html
   My bibliography  Save this article

Afriat in the lab

Author

Listed:
  • van Bruggen, Paul
  • Heufer, Jan

Abstract

Varian (1988) showed that the utility maximization hypothesis cannot be falsified when only a subset of goods is observed. We show that this result does not hold under the assumptions that unobserved prices and expenditures remain constant. These assumptions are naturally satisfied in laboratory settings where the world outside the lab remains unchanged during the experiment. Hence for so-called induced budget experiments the Generalized Axiom of Revealed Preference is a necessary and sufficient condition for utility maximization in general, not just over lab goods. Lab experiments are therefore a valid tool to put the utility maximization hypothesis to the test.

Suggested Citation

  • van Bruggen, Paul & Heufer, Jan, 2017. "Afriat in the lab," Journal of Economic Theory, Elsevier, vol. 169(C), pages 546-550.
    • Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:546-550
    DOI: 10.1016/j.jet.2017.03.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022053117300376
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jet.2017.03.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Syngjoo Choi & Shachar Kariv & Wieland M?ller & Dan Silverman, 2014. "Who Is (More) Rational?," American Economic Review, American Economic Association, vol. 104(6), pages 1518-1550, June.
    2. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    3. Harbaugh, William T & Krause, Kate, 2000. "Children's Altruism in Public Good and Dictator Experiments," Economic Inquiry, Western Economic Association International, vol. 38(1), pages 95-109, January.
    4. Raymond Fisman & Shachar Kariv & Daniel Markovits, 2007. "Individual Preferences for Giving," American Economic Review, American Economic Association, vol. 97(5), pages 1858-1876, December.
    5. Philippe Février & Michael Visser, 2004. "A Study of Consumer Behavior Using Laboratory Data," Experimental Economics, Springer;Economic Science Association, vol. 7(1), pages 93-114, February.
    6. David Ahn & Syngjoo Choi & Douglas Gale & Shachar Kariv, 2014. "Estimating ambiguity aversion in a portfolio choice experiment," Quantitative Economics, Econometric Society, vol. 5, pages 195-223, July.
    7. repec:zbw:rwirep:0443 is not listed on IDEAS
    8. Becker, Nicole & Häger, Kirsten & Heufer, Jan, 2013. "Revealed Notions of Distributive Justice II – Experimental Evidence," Ruhr Economic Papers 444, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Sabrina Bruyneel & Laurens Cherchye & Sam Cosaert & Bram De Rock & Siegfried Dewitte, 2012. "Are the Smart Kids More Rational ?," Working Papers ECARES ECARES 2012-050, ULB -- Universite Libre de Bruxelles.
    10. repec:zbw:rwirep:0444 is not listed on IDEAS
    11. Syngjoo Choi & Raymond Fisman & Douglas Gale & Shachar Kariv, 2007. "Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty," Levine's Bibliography 321307000000000793, UCLA Department of Economics.
    12. Daniel Burghart & Paul Glimcher & Stephanie Lazzaro, 2013. "An expected utility maximizer walks into a bar..," Journal of Risk and Uncertainty, Springer, vol. 46(3), pages 215-246, June.
    13. 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.
    14. Dickinson, David L., 2009. "Experiment timing and preferences for fairness," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 89-95, January.
    15. 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.
    16. Varian, Hal R., 1988. "Revealed preference with a subset of goods," Journal of Economic Theory, Elsevier, vol. 46(1), pages 179-185, October.
    17. Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, vol. 107(443), pages 1054-1078, July.
    18. Samiran Banerjee & James Murphy, 2011. "Do rational demand functions differ from irrational ones? Evidence from an induced budget experiment," Applied Economics, Taylor & Francis Journals, vol. 43(26), pages 3863-3882.
    19. John Hey & Jinkwon Lee, 2005. "Do Subjects Separate (or Are They Sophisticated)?," Experimental Economics, Springer;Economic Science Association, vol. 8(3), pages 233-265, September.
    20. Mattei, Aurelio, 2000. "Full-scale real tests of consumer behavior using experimental data," Journal of Economic Behavior & Organization, Elsevier, vol. 43(4), pages 487-497, December.
    21. Michael Visser & Matthew Roelofs, 2011. "Heterogeneous preferences for altruism: gender and personality, social status, giving and taking," Experimental Economics, Springer;Economic Science Association, vol. 14(4), pages 490-506, November.
    22. Paul van Bruggen, 2016. "A Comment on Revealed Preference with a Subset of Goods," Tinbergen Institute Discussion Papers 16-068/I, Tinbergen Institute.
    23. Becker, Nicole & Häger, Kirsten & Heufer, Jan, 2013. "Revealed Notions of Distributive Justice I – Theory," Ruhr Economic Papers 443, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    24. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 419-425.
    25. Nicole Becker & Kirsten Häger & Jan Heufer, 2013. "Revealed Notions of Distributive Justice II: Experimental Evidence," Jena Economics Research Papers 2013-042, Friedrich-Schiller-University Jena.
    26. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sabrina Bruyneel & Laurens Cherchye & Sam Cosaert & Bram De Rock & Siegfried Dewitte, 2020. "Verbal Aptitude Hurts Children’s Economic Decision Making Accuracy," Working Papers ECARES 2020-22, ULB -- Universite Libre de Bruxelles.
    2. 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.
    3. Andreas C Drichoutis & Rodolfo M Nayga, 2020. "Economic Rationality under Cognitive Load," The Economic Journal, Royal Economic Society, vol. 130(632), pages 2382-2409.
    4. Demuynck, Thomas & Hjertstrand, Per, 2019. "Samuelson's Approach to Revealed Preference Theory: Some Recent Advances," Working Paper Series 1274, Research Institute of Industrial Economics.
    5. Jan (J.P.M.) Heufer & Jason Shachat & Yan Xu, 2018. "Measuring tastes for equity and aggregate wealth behind the veil of ignorance," Tinbergen Institute Discussion Papers 18-087/I, Tinbergen Institute.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    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. Brocas, Isabelle & Carrillo, Juan D. & Combs, T. Dalton & Kodaverdian, Niree, 2019. "Consistency in simple vs. complex choices by younger and older adults," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 580-601.
    3. Heufer, Jan, 2014. "Nonparametric comparative revealed risk aversion," Journal of Economic Theory, Elsevier, vol. 153(C), pages 569-616.
    4. 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.
    5. Dziewulski, Paweł, 2020. "Just-noticeable difference as a behavioural foundation of the critical cost-efficiency index," Journal of Economic Theory, Elsevier, vol. 188(C).
    6. Carrillo, Juan & Brocas, Isabelle & Combs, T. Dalton, 2015. "Consistency in Simple vs. Complex Choices over the Life Cycle," CEPR Discussion Papers 10457, C.E.P.R. Discussion Papers.
    7. Pawel Dziewulski, 2018. "Just-noticeable difference as a behavioural foundation of the critical cost-efficiency," Economics Series Working Papers 848, University of Oxford, Department of Economics.
    8. Aluma Dembo & Shachar Kariv & Matthew Polisson & John Quah, 2021. "Ever since Allais," IFS Working Papers W21/15, Institute for Fiscal Studies.
    9. Sam Cosaert & Thomas Demuynck, 2015. "Revealed preference theory for finite choice sets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(1), pages 169-200, May.
    10. Pawel Dziewulski, 2021. "A comprehensive revealed preference approach to approximate utility maximisation," Working Paper Series 0621, Department of Economics, University of Sussex Business School.
    11. Pawe{l} Dziewulski & Joshua Lanier & John K. -H. Quah, 2024. "Revealed preference and revealed preference cycles: a survey," Papers 2405.08459, arXiv.org.
    12. Eileen Tipoe & Abi Adams & Ian Crawford, 2022. "Revealed preference analysis and bounded rationality [Consume now or later? Time inconsistency, collective choice and revealed preference]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 313-332.
    13. Yoram Halevy & Dotan Persitz & Lanny Zrill, 2018. "Parametric Recoverability of Preferences," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1558-1593.
    14. Brocas, Isabelle & Carrillo, Juan D. & Combs, T. Dalton & Kodaverdian, Niree, 2019. "The development of consistent decision-making across economic domains," Games and Economic Behavior, Elsevier, vol. 116(C), pages 217-240.
    15. Cox, James C., 2010. "Some issues of methods, theories, and experimental designs," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 24-28, January.
    16. Fisman, Raymond & Jakiela, Pamela & Kariv, Shachar, 2017. "Distributional preferences and political behavior," Journal of Public Economics, Elsevier, vol. 155(C), pages 1-10.
    17. Jan (J.P.M.) Heufer & Jason Shachat & Yan Xu, 2018. "Measuring tastes for equity and aggregate wealth behind the veil of ignorance," Tinbergen Institute Discussion Papers 18-087/I, Tinbergen Institute.
    18. Cappelen, Alexander W. & Kariv, Shachar & Sørensen, Erik Ø. & Tungodden, Bertil, 2023. "The development gap in economic rationality of future elites," Games and Economic Behavior, Elsevier, vol. 142(C), pages 866-878.
    19. Jan Heufer, 2014. "A geometric approach to revealed preference via Hamiltonian cycles," Theory and Decision, Springer, vol. 76(3), pages 329-341, March.
    20. Laurens Cherchye & Thomas Demuynck & Bram De Rock & Joshua Lanier, 2020. "Are Consumers Rational ?Shifting the Burden of Proof," Working Papers ECARES 2020-19, ULB -- Universite Libre de Bruxelles.

    More about this item

    Keywords

    Afriat's Theorem; Experimental economics; GARP; Revealed preference; Utility maximization;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:546-550. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.