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Do Large-scale Point-of-sale Data Satisfy the Generalized Axiom of Revealed Preference in Aggregation Using Representative Price Indexes?: A Case Involving Processed Food and Beverages

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  • Sato, Hideyasu

Abstract

The necessary conditions for data to be rationalized by weakly separable utility functions are verified by aggregation using representative price indexes. For processed food and beverages, the generalized axiom of revealed preference (GARP) is tested using large-scale product-level point-of-sale data. If GARP is not satisfied, the Afriat efficiency index (AEI) is introduced to assess the degree of optimization error. We find that the larger the number of observations in the time series direction, the less likely GARP is to be satisfied. However, the maximum level of AEI is, at most, more than 99.6%, indicating that the degree of the optimization error is small.

Suggested Citation

  • Sato, Hideyasu, 2020. "Do Large-scale Point-of-sale Data Satisfy the Generalized Axiom of Revealed Preference in Aggregation Using Representative Price Indexes?: A Case Involving Processed Food and Beverages," RCESR Discussion Paper Series DP19-2, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:rcesrs:dp19-2
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    More about this item

    Keywords

    Aggregation; Revealed preference; Weak separability; POS data;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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