Revealed Price Preference: Theory and Stochastic Testing

38 Pages Posted: 18 May 2017

See all articles by Rahul Deb

Rahul Deb

University of Toronto

Yuichi Kitamura

Yale University - Cowles Foundation

John Kim-Ho Quah

University of Oxford - Department of Economics

Jörg Stoye

Cornell University - Department of Economics

Date Written: May 16, 2017

Abstract

We develop a model of demand where consumers trade-off the utility of consumption against the disutility of expenditure. This model is appropriate whenever a consumer’s demand over a strict subset of all available goods is being analyzed. Data sets consistent with this model are characterized by the absence of revealed preference cycles over prices. The model is readily generalized to the random utility setting, for which we develop nonparametric statistical tests. Our application on national household consumption data provides support for the model.

Suggested Citation

Deb, Rahul and Kitamura, Yuichi and Quah, John Kim-Ho and Stoye, Jörg, Revealed Price Preference: Theory and Stochastic Testing (May 16, 2017). Cowles Foundation Discussion Paper No. 2087, Available at SSRN: https://ssrn.com/abstract=2970512 or http://dx.doi.org/10.2139/ssrn.2970512

Rahul Deb

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

HOME PAGE: http://www.economics.utoronto.ca/debrahul/

Yuichi Kitamura (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

John Kim-Ho Quah

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Jörg Stoye

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

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