The Money Pump as a Measure of Revealed Preference Violations: a Comment
In a recent and insightful paper, Echenique et al.  proposed the Money Pump Index(MPI) as an intuitive measure to evaluate the severity of violations of consumer rationality(defined in terms of revealed preference axioms). For practical applications, they suggest usingthe Mean or Median MPI. In this note, we show that computing these Median and Mean MPIis computationally hard, which makes them impractical in the case of large datasets (including"scanner" datasets as the one used by Echenique et al.). To overcome this problem, we proposeMaximum and Minimum MPIs as easy-to-apply alternatives. These MPIs preserve the intuitionof the Median and Mean MPIs and can be computed efficiently (i.e. in polynomial time). Wealso show the practical usefulness of the Maximum and Minimum MPI through an applicationto the dataset of Echenique et al..
|Date of creation:||Jul 2013|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: Av. F.D., Roosevelt, 39, 1050 Bruxelles|
Phone: (32 2) 650 30 75
Fax: (32 2) 650 44 75
Web page: http://difusion.ulb.ac.be
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.:
- Federico Echenique & Sangmok Lee & Matthew Shum, 2011. "The Money Pump as a Measure of Revealed Preference Violations," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1201-1223.
- Bram De Rock & Bart Smeulders & Laurens Cherchye & Frits Spieksma, 2013. "Goodness of fit measures for revealed preference tests: Complexity results and algorithms," ULB Institutional Repository 2013/162939, ULB -- Universite Libre de Bruxelles.
This item is featured on the following reading lists or Wikipedia pages:
When requesting a correction, please mention this item's handle: RePEc:eca:wpaper:2013/146734. 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: (Benoit Pauwels)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.