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Prices versus preferences: taste change and revealed preference

Author

Listed:
  • Abi Adams

    (Institute for Fiscal Studies and University of Oxford)

  • Richard Blundell

    (Institute for Fiscal Studies and University College London)

  • Martin Browning

    (Institute for Fiscal Studies and University of Oxford)

  • Ian Crawford

    (Institute for Fiscal Studies and Nuffield College, Oxford)

Abstract

A systematic approach for incorporating taste variation into a revealed preference framework for heterogeneous consumers is developed. We create a new methodology that enables the recovery of the minimal variation in tastes that are required to rationalise observed choice patterns. This approach is used to examine the extent to which changes in tobacco consumption have been driven by price changes or by taste changes, and whether the significance of these two channels varies across socioeconomic groups. A censored quantile approach is used to allow for unobserved heterogeneity and censoring of consumption. Statistically significant educational differences in the marginal willingness to pay for tobacco are recovered. More highly educated cohorts are found to have experienced a greater shift in their effective tastes away from tobacco.

Suggested Citation

  • Abi Adams & Richard Blundell & Martin Browning & Ian Crawford, 2015. "Prices versus preferences: taste change and revealed preference," IFS Working Papers W15/11, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:15/11
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    References listed on IDEAS

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    5. Richard Blundell & Martin Browning & Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2015. "Sharp for SARP: Nonparametric Bounds on Counterfactual Demands," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 43-60, February.
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    Cited by:

    1. Heufer, Jan & van Bruggen, Paul & Yang, Jingni, 2020. "Giving According to Agreement," Discussion Paper 2020-035, Tilburg University, Center for Economic Research.
    2. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2018. "Transitivity of preferences: when does it matter?," Theoretical Economics, Econometric Society, vol. 13(3), September.
    3. Khushboo Surana, 2022. "How different are we? Identifying the degree of revealed preference heterogeneity," Discussion Papers 22/09, Department of Economics, University of York.
    4. Laura Blow & Richard Blundell, 2018. "A Nonparametric Revealed Preference Approach to Measuring the Value of Environmental Quality," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(3), pages 503-527, March.
    5. Nail Kashaev & Victor H. Aguiar & Martin Pl'avala & Charles Gauthier, 2023. "Dynamic and Stochastic Rational Behavior," Papers 2302.04417, arXiv.org, revised Aug 2023.
    6. Sam Cosaert, 2019. "What Types are There?," Computational Economics, Springer;Society for Computational Economics, vol. 53(2), pages 533-554, February.
    7. Zhiyang Jia & Trine E. Vattø, 2016. "The path of labor supply adjustment. Sources of lagged responses to tax-benefit reforms," Discussion Papers 854, Statistics Norway, Research Department.

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