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Revealed preference with limited consideration

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  • Demuynck, T.

    (Microeconomics & Public Economics)

  • Seel, C.

    (Microeconomics & Public Economics)

Abstract

We derive revealed preference tests for models where individuals use consideration sets to simplify their consumption problem. Our basic test provides necessary and sufficient conditions for consistency of observed choices with the existence of consideration set restrictions. The same conditions can also be derived from a model in which the consideration set formation is endogenous and based on subjective, unconstrained beliefs about the prices. By imposing restrictions on these subjective beliefs, we obtain additional refined revealed preference tests. We illustrate and compare the performance of our tests by means of a dataset on household consumption choices.

Suggested Citation

  • Demuynck, T. & Seel, C., 2014. "Revealed preference with limited consideration," Research Memorandum 036, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2014036
    DOI: 10.26481/umagsb.2014036
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    Cited by:

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    2. Geng, Sen, 2022. "Limited consideration model with a trigger or a capacity," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    3. Im, Changkuk & Rehbeck, John, 2022. "Non-rationalizable individuals and stochastic rationalizability," Economics Letters, Elsevier, vol. 219(C).
    4. Geng, Sen & Özbay, Erkut Y., 2021. "Shortlisting procedure with a limited capacity," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    5. Tipoe, Eileen, 2021. "Price inattention: A revealed preference characterisation," European Economic Review, Elsevier, vol. 134(C).
    6. Eileen Tipoe & Abi Adams & Ian Crawford, 2022. "Revealed preference analysis and bounded rationality [Consume now or later? Time inconsistency, collective choice and revealed preference]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 313-332.
    7. Demuynck, Thomas & Hjertstrand, Per, 2019. "Samuelson's Approach to Revealed Preference Theory: Some Recent Advances," Working Paper Series 1274, Research Institute of Industrial Economics.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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