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Mixed Integer Programming Revealed Preference Tests of Utility Maximization and Weak Separability of Consumption, Leisure, and Money

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  • PER HJERTSTRAND
  • JAMES L. SWOFFORD
  • GERALD A. WHITNEY

Abstract

Swofford and Whitney (1987, 1988, 1994) investigated the validity of two key assumptions underlying representative agent models of macroeconomics. These assumptions are utility maximization and weak separability. Using mixed integer programming, we check revealed preference conditions for these assumptions. We find that M1, money defined by Friedman and Schwartz (1963), and a broad aggregate are weakly separable. We find that consumption goods and leisure and nondurables and services are weakly separable. We find that M2, M3, and MZM are not weakly separable. Finally, we find three categories of consumption, durables, nondurables and services, do not form an aggregate.

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  • Per Hjertstrand & James L. Swofford & Gerald A. Whitney, 2016. "Mixed Integer Programming Revealed Preference Tests of Utility Maximization and Weak Separability of Consumption, Leisure, and Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(7), pages 1547-1561, October.
  • Handle: RePEc:wly:jmoncb:v:48:y:2016:i:7:p:1547-1561
    DOI: 10.1111/jmcb.12342
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    References listed on IDEAS

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    Cited by:

    1. Apostolos Serletis & Libo Xu, "undated". "Consumption, Leisure, and Money," Working Papers 2019-08, Department of Economics, University of Calgary, revised 06 Jul 2019.
    2. Smeulders, Bart & Crama, Yves & Spieksma, Frits C.R., 2019. "Revealed preference theory: An algorithmic outlook," European Journal of Operational Research, Elsevier, vol. 272(3), pages 803-815.
    3. William A. Barnett & Neepa B. Gaekwad, 2018. "The Demand for Money for EMU: a Flexible Functional Form Approach," Open Economies Review, Springer, vol. 29(2), pages 353-371, April.
    4. Hjertstrand, Per & Swofford, James L. & Whitney, Gerald A., 2020. "General Revealed Preference Tests of Weak Separability and Utility Maximization with Incomplete Adjustment," Working Paper Series 1327, Research Institute of Industrial Economics.
    5. Anderson, Richard G. & Duca, John V. & Fleissig, Adrian R. & Jones, Barry E., 2019. "New monetary services (Divisia) indexes for the post-war U.S," Journal of Financial Stability, Elsevier, vol. 42(C), pages 3-17.
    6. Hjertstrand, Per & Swofford, James L., 2019. "Revealed preference tests of indirect and homothetic weak separability of financial assets, consumption and leisure," Journal of Financial Stability, Elsevier, vol. 42(C), pages 108-114.
    7. Demuynck, Thomas & Hjertstrand, Per, 2019. "Samuelson's Approach to Revealed Preference Theory: Some Recent Advances," Working Paper Series 1274, Research Institute of Industrial Economics.
    8. Hjertstrand, Per & Swofford, James L. & Whitney, Gerald A., 2019. "Index Numbers and Revealed Preference Rankings," Working Paper Series 1308, Research Institute of Industrial Economics.
    9. Binner, Jane M. & Chaudhry, Sajid & Kelly, Logan & Swofford, James L., 2018. "“Risky” monetary aggregates for the UK and US," Journal of International Money and Finance, Elsevier, vol. 89(C), pages 127-138.

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