Working Paper Series,
Research Institute of Industrial Economics

Abstract: Since Paul Samuelson introduced the theory of revealed preference, it has become one of the most important concepts in economics. This chapter surveys some recent contributions in the revealed preference literature. We depart from Afriat's theorem, which provides the conditions for a data set to be consistent with the utility maximization hypothesis. We provide and motivate a new condition, which we call the Varian inequalities. The advantage of the Varian inequalities is that they can be formulated as a set of mixed integer linear inequalities, which are linear in the quantity and price data. We show how the Varian inequalities can be used to derive revealed preference tests for weak separability, and show how it can be used to formulate tests of the collective household model. Finally, we discuss measurement errors in the observed data and measures of goodness-of-fit, power and predictive success.

Keywords: Afriats theorem; Collective household model; GARP; Mixed integer linear programing; Revealed preference; Varian inequalities; Weak separability

JEL-codes: C60; C63; D01; D11

26 pages, April 23, 2019

Full text files

wp1274.pdf  Full text

Download statistics

• Research Institute of Industrial Economics
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:iuiwop:1274This page generated on 2024-09-13 22:15:51.