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Afriat in the lab

Listed author(s):
  • van Bruggen, Paul
  • Heufer, Jan
Registered author(s):

    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053117300376
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 169 (2017)
    Issue (Month): C ()
    Pages: 546-550

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    Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:546-550
    DOI: 10.1016/j.jet.2017.03.007
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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    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.
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    6. 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.
    7. Raymond Fisman & Shachar Kariv & Daniel Markovits, 2007. "Individual Preferences for Giving," American Economic Review, American Economic Association, vol. 97(5), pages 1858-1876, December.
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    9. 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.
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    11. 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.
    12. 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, 07.
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    17. 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.
    18. 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.
    19. Paul van Bruggen, 2016. "A Comment on Revealed Preference with a Subset of Goods," Tinbergen Institute Discussion Papers 16-068/I, Tinbergen Institute.
    20. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
    21. 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.
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