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GARP violation, Economic Environment Distortions and Shadow Prices: Evidence from Household Expenditure Panel Data

  • Marc-Arthur Diaye

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

  • François Gardes

    ()

    (Axe Economie mathématique et jeux - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

  • Christophe Starzec

    ()

    (Axe Microéconomie appliquée et économétrie - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

This paper contributes to the discussion of the compatibility of consumers' behavior in "real" life with GARP. Within expenditure panel data we observe a relatively low rate of violation (240 out of 3630 households). We show that these violations do not imply an "irrational" behavior of the agents, but can be attributed to a change in the agents' choice conditions during a period of time, which includes a shift from a centrally planned towards a market oriented economy.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00449463.

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Date of creation: 01 Jan 2010
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Handle: RePEc:hal:cesptp:halshs-00449463
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00449463
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  1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  2. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
  3. Andreoni,J. & Harbaugh,W.T., 2005. "Power indices for revealed preference tests," Working papers 10, Wisconsin Madison - Social Systems.
  4. Aizcorbe, Ana M, 1991. "A Lower Bound for the Power of Nonparametric Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 463-67, October.
  5. Matzkin, Rosa L, 1991. "Axioms of Revealed Preference for Nonlinear Choice Sets," Econometrica, Econometric Society, vol. 59(6), pages 1779-86, November.
  6. Philippe Février & Michael Visser, 2004. "A Study of Consumer Behavior Using Laboratory Data," Experimental Economics, Springer, vol. 7(1), pages 93-114, February.
  7. 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.
  8. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
  9. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  10. 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, vol. 91(5), pages 1539-1545, December.
  11. Pashardes, Panos, 1993. "Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation," Economic Journal, Royal Economic Society, vol. 103(419), pages 908-15, July.
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