Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1309: Power Against Random Expenditure Allocation for Revealed Preference Tests

Per Hjertstrand ()
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Per Hjertstrand: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: This paper proposes new power indices for revealed preference tests. The indices are based on a model of irrational consumption behavior where the consumer randomly allocates a certain fraction of expenditure. The methods allow a researcher to trace out the entire power curve against random expenditure allocation. The power indices are illustrated on altruistic choices in experimental data.

Keywords: GARP; Power; Revealed preference

JEL-codes: C14; D12

15 pages, First version: December 3, 2019. Revised: April 30, 2021.

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