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A simplified test for preference rationality of two-commodity choice

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  • Samiran Banerjee

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  • James Murphy

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Abstract

We provide a simplified test to determine if choice data from a two-commodity consumption set satisfies the Generalized Axiom of Revealed Preference (GARP), and thus the preference or utility maximization hypothesis. We construct an algorithm for this test and illustrate its application on experimental choice data. Copyright Springer Science + Business Media, LLC 2006

Suggested Citation

  • Samiran Banerjee & James Murphy, 2006. "A simplified test for preference rationality of two-commodity choice," Experimental Economics, Springer;Economic Science Association, vol. 9(1), pages 67-75, April.
  • Handle: RePEc:kap:expeco:v:9:y:2006:i:1:p:67-75 DOI: 10.1007/s10683-006-4313-6
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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. Matzkin, Rosa L. & Richter, Marcel K., 1991. "Testing strictly concave rationality," Journal of Economic Theory, Elsevier, vol. 53(2), pages 287-303, April.
    3. James Andreoni, 2001. "Giving According to GARP," Theory workshop papers 339, UCLA Department of Economics.
    4. Varian, Hal R., 1988. "Revealed preference with a subset of goods," Journal of Economic Theory, Elsevier, vol. 46(1), pages 179-185, October.
    5. Cox, James C, 1997. "On Testing the Utility Hypothesis," Economic Journal, Royal Economic Society, vol. 107(443), pages 1054-1078, July.
    6. William T. Harbaugh & Kate Krause & Timothy R. Berry, 2001. "GARP for Kids: On the Development of Rational Choice Behavior," American Economic Review, American Economic Association, pages 1539-1545.
    7. 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.
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    Cited by:

    1. repec:the:publsh:2733 is not listed on IDEAS
    2. Heufer, Jan, 2007. "Revealed Preference and the Number of Commodities," Ruhr Economic Papers 36, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. 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.
    4. Jim Engle-Warnick & Natalia Mishagina, 2014. "Insensitivity to Prices in a Dictator Game," CIRANO Working Papers 2014s-19, CIRANO.
    5. Cherchye, Laurens & De Rock, Bram & Demuynck, Thomas, 0. "Transitivity of preferences: when does it matter?," Theoretical Economics, Econometric Society.
    6. 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.
    7. Heufer, Jan, 2014. "Nonparametric comparative revealed risk aversion," Journal of Economic Theory, Elsevier, vol. 153(C), pages 569-616.
    8. James Murphy & Samiran Banerjee, 2015. "A caveat for the application of the critical cost efficiency index in induced budget experiments," Experimental Economics, Springer;Economic Science Association, vol. 18(3), pages 356-365, September.

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