IDEAS home Printed from https://ideas.repec.org/p/ifs/ifsewp/15-20.html
   My bibliography  Save this paper

Mutually consistent revealed preference bounds

Author

Listed:
  • Abi Adams

    () (Institute for Fiscal Studies and University of Oxford)

Abstract

Revealed preference restrictions are increasingly used to bound demand responses and as shape restrictions in nonparametric estimation exercises. However, the restrictions imposed are not su?cient for rationality when predictions are made at more than a single price regime. We highlight the nonlinearities in revealed preference restrictions and the nonconvexities in the set of predictions that arise when making multiple predictions. We develop a mixed integer programming characterisation of the problem that can be used to impose rationality on multiple predictions. The approach is applied to the UK Family Expenditure Survey to recover jointly rational nonparametric estimates of income expansion paths.

Suggested Citation

  • Abi Adams, 2015. "Mutually consistent revealed preference bounds," IFS Working Papers W15/20, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:15/20
    as

    Download full text from publisher

    File URL: https://www.ifs.org.uk/uploads/publications/wps/WP201520.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Blundell, R. & Browning, M. & Cherchye, L.J.H. & Crawford, I. & de Rock, B. & Vermeulen, F.M.P., 2012. "Sharp for SARP : Nonparametric Bounds on the Behavioural and Welfare Effects of Price Changes," Discussion Paper 2012-065, Tilburg University, Center for Economic Research.
    2. Cherchye, Laurens & De Rock, Bram & Sabbe, Jeroen & Vermeulen, Frederic, 2008. "Nonparametric tests of collectively rational consumption behavior: An integer programming procedure," Journal of Econometrics, Elsevier, vol. 147(2), pages 258-265, December.
    3. Charles F. Manski, 2014. "Identification of income–leisure preferences and evaluation of income tax policy," Quantitative Economics, Econometric Society, vol. 5, pages 145-174, March.
    4. 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.
    5. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & Hjertstrand, Per, 2015. "Revealed preference tests for weak separability: An integer programming approach," Journal of Econometrics, Elsevier, vol. 186(1), pages 129-141.
    6. Jose Apesteguia & Miguel A. Ballester, 2015. "A Measure of Rationality and Welfare," Journal of Political Economy, University of Chicago Press, vol. 123(6), pages 1278-1310.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rahul Deb & Yuichi Kitamura & John K. -H. Quah & Jorg Stoye, 2018. "Revealed Price Preference: Theory and Empirical Analysis," Papers 1801.02702, arXiv.org, revised Sep 2018.
    2. Laurens Cherchye & Sam Cosaert & Thomas Demuynck & Bram De Rock, 2017. "Group Consumption with Caring Individuals," Working Papers ECARES ECARES 2017-45, ULB -- Universite Libre de Bruxelles.
    3. Yuichi Kitamura & Jörg Stoye, 2018. "Nonparametric Analysis of Random Utility Models," Econometrica, Econometric Society, vol. 86(6), pages 1883-1909, November.
    4. Rahul Deb & Yuichi Kitamura & John Quah & Joerg Stoye, 2017. "Revealed Price Preference: Theory and Stochastic Testing," Working Papers tecipa-582, University of Toronto, Department of Economics.
    5. Yuichi Kitamura & Jorg Stoye, 2019. "Nonparametric Counterfactuals in Random Utility Models," Papers 1902.08350, arXiv.org, revised May 2019.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:15/20. 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: (Emma Hyman). General contact details of provider: http://edirc.repec.org/data/ifsssuk.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.