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Revealed Price Preference: Theory and Stochastic Testing

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Abstract

We develop a model of demand where consumers trade-off the utility of consumption against the disutility of expenditure. This model is appropriate whenever a consumer’s demand over a strict subset of all available goods is being analyzed. Data sets consistent with this model are characterized by the absence of revealed preference cycles over prices. The model is readily generalized to the random utility setting, for which we develop nonparametric statistical tests. Our application on national household consumption data provides support for the model.

Suggested Citation

  • Rahul Deb & Yuichi Kitamura & John K.-H. Quah & Jorg Stoye, 2017. "Revealed Price Preference: Theory and Stochastic Testing," Cowles Foundation Discussion Papers 2087, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:2087
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    References listed on IDEAS

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    1. Stefan Hoderlein & Jörg Stoye, 2014. "Revealed Preferences in a Heterogeneous Population," The Review of Economics and Statistics, MIT Press, vol. 96(2), pages 197-213, May.
    2. Forges, Françoise & Minelli, Enrico, 2009. "Afriat's theorem for general budget sets," Journal of Economic Theory, Elsevier, vol. 144(1), pages 135-145, January.
    3. Abi Adams, 2015. "Mutually consistent revealed preference bounds," IFS Working Papers W15/20, Institute for Fiscal Studies.
    4. John Quah, 2014. "A test for weakly separable preferences," Economics Series Working Papers 708, University of Oxford, Department of Economics.
    5. Stoye, Jörg & Kitamura, Yuichi, 2013. "Nonparametric Analysis of Random Utility Models: Testing," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79753, Verein für Socialpolitik / German Economic Association.
    6. repec:dau:papers:123456789/4099 is not listed on IDEAS
    7. Richard Blundell & Joel L. Horowitz & Matthias Parey, 2009. "Measuring the price responsiveness of gasoline demand," CeMMAP working papers CWP11/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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    Cited by:

    1. repec:eee:transa:v:120:y:2019:i:c:p:295-305 is not listed on IDEAS
    2. Yuichi Kitamura & Jörg Stoye, 2018. "Nonparametric Analysis of Random Utility Models," Econometrica, Econometric Society, vol. 86(6), pages 1883-1909, November.
    3. Victor H. Aguiar & Roberto Serrano, 2018. "Cardinal Revealed Preference, Price-Dependent Utility, and Consistent Binary Choice," Working Papers 2018-3, Brown University, Department of Economics.
    4. Matias D. Cattaneo & Xinwei Ma & Yusufcan Masatlioglu & Elchin Suleymanov, 2017. "A Random Attention Model," Papers 1712.03448, arXiv.org, revised Aug 2019.
    5. Victor H. Aguiar & Nail Kashaev, 2018. "Stochastic Revealed Preferences with Measurement Error," Papers 1810.05287, arXiv.org.
    6. Bram De Rock & Laurens Cherchye & Bart Smeulders, 2019. "Nonparametric Analysis of Random Utility Models: Computational Tools for Statistical Testing," Working Papers ECARES 2019-19, ULB -- Universite Libre de Bruxelles.
    7. Bart Smeulders, 2018. "Column Generation Algorithms for Nonparametric Analysis of Random Utility Models," Papers 1812.01400, arXiv.org.
    8. repec:eee:indorg:v:62:y:2019:i:c:p:251-272 is not listed on IDEAS

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General

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