Revealed preference tests for consistency with weakly separable indirect utility
- 130 Downloads
Since Varian (Econometrica 50:945–973, 1982; Review of Economic Studies 50:90–110, 1983) made checking for consistency with revealed preference conditions more accessible to empirical researchers; researchers have often used revealed preference procedures to test their maintained hypotheses and narrow the scope of their demand studies. The tests developed by Varian are for the direct utility function, while researchers estimating demand systems often find it convenient to model consumer behavior with an indirect utility function. Unfortunately structure revealed in the direct utility function does not necessarily follow for the indirect utility function. To remedy this problem, we set forth conditions for checking consumer data for consistency with revealed preference conditions for minimization and weak separability of the indirect utility function.
KeywordsRevealed preference Indirect utility Weak separability
JEL ClassificationC60 D11 D12
Unable to display preview. Download preview PDF.
- Blackorby C., Primont D., Russell R. R. (1978) Duality, Separability, and Functional Structure. North-Holland, AmsterdamGoogle Scholar
- Diewert W. E., Parkan C. (1978) Tests for the Consistency Of Consumer Data and Nonparametric Index Numbers. Discussion Paper 78-27. Department of Economics, University of British Columbia, VancouverGoogle Scholar
- Hjertstrand P. (2007) Food demand in Sweden: A non-parametric approach. In: Barnett W.A., Serletis A. (eds) Functional Structure Inference. International Symposia in Economic Theory and Econometrics (ISETE). Elsevier Science, London, pp 157–182Google Scholar
- Hjertstrand P. (2009) A Monte Carlo study of the necessary and sufficient conditions for weak separability. In: Binner J.M., Edgerton D.L., Elger T. (eds) Measurement Error—Consequences, Applications and Solutions. Advances in Econometrics (Vol 24). Bingley, UK, Emerald Group Publishing, pp 151–182Google Scholar