Afriat and Revealed Preference Theory

Diewert, W. Erwin

doi:10.2307/2296461

Cited by 303 publications

(237 citation statements)

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“…The empirical contribution is that we apply a revealed preference methodology in combination with experimental data for assessing the empirical goodness-of-fit of the collective model. More specifically, we will focus on revealed preference conditions in the tradition of Afriat (1967), Diewert (1973), and Varian (1982). These conditions enable checking consistency of a given data set with a particular specification of the collective consumption model.…”

Section: Introductionmentioning

confidence: 99%

Collective consumption models with restricted bargaining weights: an empirical assessment based on experimental data

2011

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We use experimental data to analyze consumption decisions by groups of individuals who have to reach a consensus on spending a joint budget. Our experiment involves dyads (i.e. two-member groups) who have to compose consumption bundles consisting of three commodities (wine, orange juice and M&Ms). We focus on the collective consumption model to describe group behavior. This model represents group decisions as Pareto optimal outcomes of a within-group bargaining process, with rational group members who are each characterized by individual bargaining weights. We also consider specifications of the collective model that restrict the variation of these bargaining weights. A distinguishing feature of our study is that we use revealed preference testing tools to assess the goodness-of-fit and discriminatory power of alternative specifications of the collective model. Our experimental results suggest that the most appropriate model specification allows for a limited variation of the bargaining weights. This is a substantially revised and reoriented version of the paper that has been circulating under the title ''How to model collective decisions? Evidence from a laboratory experiment. S. BruyneelMarketing and Organisation Studies,

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Section: Introductionmentioning

confidence: 99%

Collective consumption models with restricted bargaining weights: an empirical assessment based on experimental data

2011

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“…e Afriat inequalities are linear in the unknowns U t and λ t , which implies that their feasibility can be veri ed using elementary linear programming methods (see Afriat (1967) and Diewert (1973) for discussions of this method). In a similar vein, feasibility of the inequalities in condition (iv) can be checked by solving a linear programming problem (in the unknowns u t ) applied to the contrapositive statement of this condition.…”

Section: Revealed Preferences Conditionsmentioning

confidence: 99%

Revealed preference tests for weak separability: An integer programming approach

Cherchye

Demuynck

Rock

et al. 2015

Journal of Econometrics

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We focus on the revealed preference conditions that characterize the collection of nite data sets that are consistent with the maximization of a weakly separable utility function. From a theoretical perspective, we show that verifying these revealed preference conditions is a difficult problem, i.e. it is np-complete. From a practical perspective, we present an integer programming approach that can verify the revealed preference conditions in a straightforward way, which is particularly attractive in view of empirical analysis. We demonstrate the versatility of this integer programming approach by showing that it also allows for testing homothetic separability and weak separability of the indirect utility function. We illustrate the practical usefulness of the approach by an empirical application to Spanish household consumption data. In this application we also include two statistical tests in which we account for measurement error. JEL Classi cation: C14, C60, D01, D10.Keywords: weak separability, revealed preference, integer programming * We thank Ian Crawford for generously providing us the data of the Encuesta Continua de Presupestos Familiares (ECPF), which we use in our empirical study. We are also grateful to Adrian Fleissig, James Swofford and Gerald Whitney for helpful comments. is paper is a merger of two working papers, Cherchye, Demuynck, and De Rock (2011c) and Hjertstrand (2011

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“…The inherent problems associated with parametric testing of weak separability have resulted in the growth of nonparametric approaches, often based upon revealed preference theory, with the seminal papers being those of Varian (1982Varian ( , 1983, who drew on the earlier work of Afriat (1967) and Diewert (1973). But these tests have similarly performed poorly in Monte Carlo studies, because they have tended to be deterministic tests that do not cope well with violations of revealed preference theory resulting from noise in the data.…”

Section: Consumer Theorymentioning

confidence: 99%