Demand Systems with and without Errors

Arthur Lewbel

American Economic Review, 2001, vol. 91, issue 3, 611-618

Abstract: Revealed preference theory assumes that each consumer has demands that are rational, meaning that they arise from the maximization of his or her own utility function. In contrast, econometric or statistical demand models assume that each consumer's demands equal a rational systematic component derived from a common utility function, plus an individual-specific, additive error term. This paper reconciles these differences, by providing necessary and sufficient conditions for rationality of statistical demand models given individual consumer rationality.

JEL-codes: C51 D12 (search for similar items in EconPapers)
Date: 2001
Note: DOI: 10.1257/aer.91.3.611
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Citations: View citations in EconPapers (90)

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