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Parametric Recoverability of Preferences

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Listed author(s):
  • Halevy, Yoram
  • Persitz, Dotan
  • Zrill, Lanny

Abstract

We bring revealed preference theory to bear on the problem of recovering approximate parametric preferences from consistent and inconsistent consumer choices. The paper investigates two measures for the incompatibility between the revealed preference relation implied by choices and the ranking induced by the proposed parametric preferences. We provide a novel characterization of several well-known inconsistency indices through these incompatibility measures. This allows a researcher to analyze both consistent and inconsistent choices, by decomposing an incompatibility measure into inconsistency and misspecification indices.

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File URL: http://faculty.arts.ubc.ca/yhalevy/GARP_HPZ.pdf
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Paper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number yoram_halevy-2012-20.

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Length: 39 pages
Date of creation: 30 Jun 2012
Date of revision: 28 Aug 2015
Handle: RePEc:ubc:pmicro:yoram_halevy-2012-20
Contact details of provider: Web page: http://www.economics.ubc.ca/

Keywords: Revealed Preference; Recoverability of Preferences; GARP; inconsistency; incompatibility;

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Find related papers by JEL classification:
  • C00 - Mathematical and Quantitative Methods - - General - - - General
  • D00 - Microeconomics - - General - - - General
  • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
  • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General

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Cited by:

  1. Ian Crawford & Bram De Rock, 2014. "Empirical Revealed Preference," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 503-524, 08.
  2. Hiroki Nishimura & Efe A. Ok & John K.-H. Quah, 2017. "A Comprehensive Approach to Revealed Preference Theory," American Economic Review, American Economic Association, vol. 107(4), pages 1239-1263, April.
  3. Heufer, Jan, 2014. "Nonparametric comparative revealed risk aversion," Journal of Economic Theory, Elsevier, vol. 153(C), pages 569-616.
  4. 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.
  5. Jan Heufer & Per Hjertstrand, 2015. "Homothetic Efficiency and Test Power: A Non-Parametric Approach," Tinbergen Institute Discussion Papers 15-064/I, Tinbergen Institute.
  6. Miguel Costa-Gomes & Carlos Cueva & Georgios Gerasimou & Matus Tejiscak, 2014. "Choice, Deferral and Consistency," Discussion Paper Series, Department of Economics 201416, Department of Economics, University of St. Andrews, revised 26 Dec 2016.
  7. Paolo Giovanni Piacquadio, 2016. "A Fairness Justification of Utilitarianism," CESifo Working Paper Series 5785, CESifo Group Munich.
  8. John Quah & Hiroki Nishimura & Efe A. Ok, 2013. "A Unified Approach to Revealed Preference Theory: The Case of Rational Choice," Economics Series Working Papers 686, University of Oxford, Department of Economics.

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