Testing axioms of revealed preference in Stata

Demetry, Marcos; Hjertstrand, Per; Polisson, Matthew

doi:10.1177/1536867x221106374

Cited by 3 publications

(5 citation statements)

References 37 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Crawford and Pendakur (2012) affirms that in a framework where finding the minimum number of types is important, unobserved preference heterogeneity is vastly more important than observed demographic heterogeneity. The data were analysed using the revealedPrefs Rpackage of Boelaert (2019) and rpaxioms Stata-package of Demetry, et al (2020).…”

Section: Model Specification For Rationality Testmentioning

confidence: 99%

Food Expenditure Pattern of Household in Delta State, Nigeria: Economic Rationality Essentials

Ojogho

Imade²

2022

SJAFS

View full text Add to dashboard Cite

Parametric utility model that predicts preferences of heterogeneous food consumers is flawed with issues of economic rationality. Using axiomatic preference indexes on food data from 459 household selected from a three-stage sampling procedure, the aim of the study was to check whether a finite set of price and demand observations made on household consumers in Delta state is rationalizable by some form of utility maximization that is common across all households. The study found heterogeneity in food consumption behaviour with evidence against rationality in utility maximization for food expenditure choices at Afriat Efficiency Index (AEI) of unity, violating the GARP, SARP, SGARP, HARP and CM outside the optimum AEI of between 0.536 and 0.982 inclusive. In three of the four food choice categories, households had below the Varian AEI threshold of 0.95. Particularly, household expenditure behavior in the State violated the GARP axiom of revealed preference at 0.018, 0.07, 0.104, 0.05, and 0.081 severity of violations for food in general, protein, carbohydrate, fats and oil, and fruits and vegetables sub-food categories respectively with 5-45% of inconsistent household behaviour. At AEI of unity, 14.30%, 4.79%, 11.43% and 45.04% of the households failed the zero tolerance in the carbohydrate, protein, fats and oil, and fruits and vegetables categories respectively. Only about three to six revealed preferences were found necessary to fully rationalise observed food expenditure choices in the State. Thus, not only are households irrational in utility maximization, there is unstable preference in food demand. Therefore, there is, in the aggregate, no exact one continuous, strictly increasing, piecewise strictly concave, skew-symmetric, and/or homothetic preference function that would completely rationalize households food consumption behaviour in Delta state.

show abstract

Section: Model Specification For Rationality Testmentioning

confidence: 99%

Food Expenditure Pattern of Household in Delta State, Nigeria: Economic Rationality Essentials

Ojogho

Imade²

2022

SJAFS

View full text Add to dashboard Cite

show abstract

“…We address three issues concerning consumer behavior: (i) consistency with the generalized axiom of revealed preference (GARP); (ii) consistency with the homothetic axiom of revealed preference (HARP); and (iii) weak separability of the representative agent's utility function. In doing so, we use the Demetry et al (2020) Stata command checkax which implements Varian's (1982) algorithm. The command provides information regarding the number of observations that violate the hypothesis.…”

Section: Revealed Preference Analysismentioning

confidence: 99%

“…GARP for the entire data set is a necessary and sufficient condition for the utility maximization problem in (7) to have a solution. We use the Demetry et al (2020) Stata command checkax to implement Varian's (1982) GARP testsee also Hjertstrand et al (2016). The command provides information regarding the number of observations that violate the hypothesis.…”

Section: Garp Testsmentioning

confidence: 99%

“…The command provides information regarding the number of observations that violate the hypothesis. In a data set of T observations, the total possible number of GARP violations is T(T − 1)-see Demetry et al (2020).…”

Section: Garp Testsmentioning

confidence: 99%

“…where h(x) is homogeneous of degree 1 and g(h) is positive monotonic." Again, we use the Demetry et al (2020) Stata command checkax to implement the HARP test as described in Varian (1983). In a data set of T observations, the total possible number of HARP violations is T.…”

Section: Harp Testsmentioning

confidence: 99%

See 2 more Smart Citations

Credit Cards, the Demand for Money, and Monetary Aggregation

Liu

Serletis

2021

Macroecon. Dynam.

View full text Add to dashboard Cite

We use nonparametric and parametric demand analysis to empirically estimate a credit card-augmented monetary asset demand system, based on the Minflex Laurent flexible functional form, and a sample period that includes the 2007–2009 global financial crisis and the COVID-19 pandemic. We also use multivariate copulae in an attempt to capture various patterns of dependence structures. In doing so, we relax the joint normality assumption of the errors of the demand system and estimate the model without having to delete one equation as is usually the practice. We show that the Minflex Laurent copula-based demand system produces a higher income elasticity for credit card transaction services and higher Morishima elasticities between credit card transaction services and monetary assets compared to the traditional estimation of the Minflex Laurent demand system. We also show that credit cards are substitutes for monetary assets and that there is lower tail dependence between the demand for credit card transaction services and transaction balances.

show abstract