Revealed Preferences in a Heterogeneous Population

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Authors Stefan Hoderlein, Jrg Stoye
Journal/Conference Name Review of Economics and Statistics
Paper Category
Paper Abstract This paper explores the empirical content of the weak axiom of revealed preference (WARP) for repeated cross-sections. In a heterogeneous population, the fraction of consumers who violate WARP is not point identified but can be bounded. These bounds, as well as some nonparametric refinements, correspond to intuitive behavioral assumptions if there are two goods. With three or more goods, such intuitions break down, and plausible assumptions can have counterintuitive implications. We also provide estimators and confidence regions. The empirical application reveals that in the British Family Expenditure Survey, upper bounds are frequently positive but lower bounds are not significantly so.
Date of publication 2014
Code Programming Language R
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