How demanding is the Revealed Preference approach to Demand?

By Ian Crawford. 2009

147 citations recorded by the source corpus.

A well known problem with revealed preference methods is that when data are found to satisfy their restrictions it is hard to know whether this should be viewed as a triumph for economic theory, or a warning that these conditions are so undemanding that almost anything goes. This paper allows researchers to make this distinction. Our approach builds on theoretical support in the form of an axiomatic cardinal characterisation of a measure of predictive success due to Selten(1991). We illustrate the idea using a large, nationally representative panel survey of Spanish consumers with broad commodity coverage. The results show that this approach to revealed preference methods can lead us radically to reassess our view of the empirical performance of economic theory.

Subfields: Economics and Econometrics, General Decision Sciences, Marketing

View Paper: https://www.semanticscholar.org/paper/2ba67b3dc61cf7be2c32a32409a1bec58efe86d5

Citations in the corpus

• Revealed Preference, Rational Inattention, and Costly Information Acquisition (2015, unknown): “15Treating point estimates as each subject’s true posterior beliefs 16The use of random benchmarks has been discussed by, for example, Beatty and Crawford [2011]. The precise procedure used to construct the random behavior is as follows: for each decision problem and for each state, a random number ”