Real Income Growth And Revealed Preference Inconsistency
If a smooth demand function violates the strong axiom of revealed preference, the income and prices can follow a cycle and returm to their starting values even though real income is always rising. We show how real income growth along the “worst” revealed preference cycle depends on the range of price variation and on violations of the Slutsky conditions. We relate this result to proposed reforms of the consumer price index and use it to justify a new index of local demand inconsistency. We also use the Slutsky matrix to determine an upper bound on the number of observations required to detect revealed preference inconsistency.
|Date of creation:||May 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +34-91 6249594
Fax: +34-91 6249329
Web page: http://www.eco.uc3m.es
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jerison, David & Jerison, Michael, 1992.
"Approximately rational consumer demand and ville cycles,"
Journal of Economic Theory,
Elsevier, vol. 56(1), pages 100-120, February.
- David Jerison & Michael Jerison, 1989. "Approximately Rational Consumer Demand and Ville Cycles," Discussion Paper Serie A 246, University of Bonn, Germany.
- Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
- Afriat, S N, 1973. "On a System of Inequalities in Demand Analysis: An Extension of the Classical Method," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 460-72, June.
- 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.
- Browning, M. & Chiappori, P.A., 1994.
"Efficient Intra-Household allocations: A General Characterization and Empirical Tests,"
DELTA Working Papers
94-16, DELTA (Ecole normale supérieure).
- M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
- Martin Browning & Pierre-Andre Chiappori, 1994. "Efficient Intra-Household Allocations: a General Characterization and Empirical Tests," Department of Economics Working Papers 1994-02, McMaster University.
- Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
- Sen, A., 1996.
"Maximisation and the Act of Choice,"
270, Banca Italia - Servizio di Studi.
- Amartya Sen, 1996. "Maximization and the Act of Choice," Harvard Institute of Economic Research Working Papers 1766, Harvard - Institute of Economic Research.
- Jerison, Michael, 1994. "Optimal Income Distribution Rules and Representative Consumers," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 739-71, October.
- Hurwicz, Leonid & Richter, Marcel K, 1979. "Ville Axioms and Consumer Theory," Econometrica, Econometric Society, vol. 47(3), pages 603-19, May.
- Richter, Marcel K., 1979. "Duality and rationality," Journal of Economic Theory, Elsevier, vol. 20(2), pages 131-181, April.
- Shafer, Wayne J., 1977. "Revealed preference cycles and the slutsky matrix," Journal of Economic Theory, Elsevier, vol. 16(2), pages 293-309, December.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
- Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
- Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
- Koo, Anthony Y C & Hasenkamp, Georg, 1972. "Structure of Revealed Preference: Some Preliminary Evidence," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 724-44, July-Aug..
- Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
When requesting a correction, please mention this item's handle: RePEc:cte:werepe:we012902. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.