IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/282.html
   My bibliography  Save this paper

Revealed Preference Analysis of Characteristics Models

Author

Listed:
  • Martin Browning
  • Laura Blow

Abstract

Characteristics models have been found to be useful in many areas of economics. However, their empirical implementation tends to rely heavily on functional form assumptions. In this paper we develop a revealed preference approach to characteristics models. We derive the necessary and sufficient empirical conditions under which data on the market behaviour of heterogeneous, price-taking consumers are nonparametrically consistent with the consumer characteristics model. Where these conditions hold, we show how information may be recovered on individual consumer`s marginal valuations of product attributes. In some cases marginal valuations are point identified and in other cases we can only recover bounds. Where the conditions fail we highlight the role which the introduction of unobserved product attributes can play in rationalising the data. We implement these ideas using consumer panel data on the Danish milk market.

Suggested Citation

  • Martin Browning & Laura Blow, 2006. "Revealed Preference Analysis of Characteristics Models," Economics Series Working Papers 282, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:282
    as

    Download full text from publisher

    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper282.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
    3. C. Lanier Benkard & Patrick Bajari, 2004. "Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach," NBER Working Papers 10278, National Bureau of Economic Research, Inc.
    4. Richard W. Blundell & Martin Browning & Ian A. Crawford, 2003. "Nonparametric Engel Curves and Revealed Preference," Econometrica, Econometric Society, vol. 71(1), pages 205-240, January.
    5. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
    6. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    7. Richard Blundell & Jean-Marc Robin, 2000. "Latent Separability: Grouping Goods without Weak Separability," Econometrica, Econometric Society, vol. 68(1), pages 53-84, January.
    8. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    9. Valerie Lechene & Jerome Adda, 2004. "On the Identification of the Effect of Smoking on Mortality," Economics Series Working Papers 184, University of Oxford, Department of Economics.
    10. Varian, Hal R., 1988. "Revealed preference with a subset of goods," Journal of Economic Theory, Elsevier, vol. 46(1), pages 179-185, October.
    11. Muellbauer, John, 1974. "Household Production Theory, Quality, and the "Hedonic Technique."," American Economic Review, American Economic Association, pages 977-994.
    12. Diewert, W. E. & Parkan, C., 1985. "Tests for the consistency of consumer data," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 127-147.
    13. S. E. Pudney, 1981. "Instrumental Variable Estimation of a Characteristics Model of Demand," Review of Economic Studies, Oxford University Press, vol. 48(3), pages 417-433.
    14. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-597, May.
    15. Browning, M J, 1983. "Necessary and Sufficient Conditions for Conditional Cost Functions," Econometrica, Econometric Society, vol. 51(3), pages 851-856, May.
    16. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
    17. Ian Crawford, 2004. "Necessary and sufficient conditions for latent separability," CeMMAP working papers CWP02/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    18. James Heckman & Jose Scheinkman, 1987. "The Importance of Bundling in a Gorman-Lancaster Model of Earnings," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 243-255.
    19. Bajari, Patrick & Benkard, C. Lanier, 2004. "Demand Estimation With Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach," Research Papers 1842, Stanford University, Graduate School of Business.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Product Characteristics; Revealed Preference;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:oxf:wpaper:282. 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: (Anne Pouliquen). General contact details of provider: http://edirc.repec.org/data/sfeixuk.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.