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Parametric Recoverability of Preferences

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

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/

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