The Construction of Utility Functions from Expenditure Data

The computational complexity of rationalizing Pareto optimal choice behavior

“…Finally, Talla Nobibon and Spieksma (2010) nd that verifying the revealed preference conditions of Pareto optimal choice behavior for a two person coalition as derived by Cherchye, De Rock, and Vermeulen (2007) is an np-complete problem. is setting differs from ours in the sense that these conditions are obtained from a revealed preference analysis a là Afriat (1967) and Varian (1982) (i.e. in a household consumption setting).…”

How Soon Is Now? Evidence of Present Bias from Convex Time Budget Experiments

“…can be rationalized by a utility function that is continuous, increasing, concave, and piecewise linear (Afriat 1967, Varian 1982, Varian 1983). As we discuss in detail below, the majority of subjects in our experiment do not violate GARP.…”

“…When budgets are linear, revealed preference theory offers a direct test of rationality: choices can be rationalized by a utility function that is well-behaved (in the sense of being continuous, increasing, concave, and piecewise linear) if and only if they satisfy GARP (Afriat 1967).…”

A nonparametric analysis of habits models

“…welfare measures and discount rates? The path which is taken in this paper is based on the nonparametric-revealed preference approach developed in Samuelson (1948), Houthakker (1950), Afriat (1967) and Varian (1982) and the extension of these ideas to the life-cycle/permanent income version of the discounted utility model developed by Browning (1989) who showed how the constancy of the marginal utility of income across periods can be used to generate finite linear-programming type restrictions which only involve data on observables: discounted prices and quantities. These provide a simple yes/no test of exact, error free, consistency between the data and the theory.…”

“…The approach is based on the combinatorial/revealed preference framework of Samuelson (1948), Houthakker (1950, Afriat (1967) and Varian (1982) and the extenstion and application of these ideas to intertemporal models in Browning (1989). It provides a simple finitely computable test of the model which does not require a parameterisation of the underlying (hypothesised) preferences.…”