Revealed Preference Tests of Collectively Rational Consumption Behavior: Formulations and Algorithms

Fabrice Talla Nobibon (), Laurens Cherchye, Yves Crama (), Thomas Demuynck, Bram De Rock and Frits C. R. Spieksma ()
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Fabrice Talla Nobibon: Senior Operations Research Analyst at FedEx, 1000 Brussels, Belgium
Yves Crama: QuantOM, HEC-Management School, University of Liège, 4000 Liège, Belgium
Frits C. R. Spieksma: ORSTAT, Faculty of Business and Economics, University of Leuven, 3000 Leuven, Belgium

Operations Research, 2016, vol. 64, issue 6, 1197-1216

Abstract: This paper focuses on revealed preference tests of the collective model of household consumption. We start by showing that the decision problems corresponding to testing collective rationality are NP-complete. This makes the application of these tests problematic for (increasingly available) large(r)-scale data sets. We then present two approaches to overcome this negative result. First, we introduce exact algorithms based on mixed-integer programming (MIP) formulations of the collective rationality tests, which can be usefully applied to medium-sized data sets. Next, we propose simulated annealing heuristics, which allow for efficient testing of the collective model in the case of large data sets. We illustrate our methods by a number of computational experiments based on Dutch labor supply data.

Keywords: revealed preference axioms; rationality; mixed-integer programming; global optimization; simulated annealing (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:64:y:2016:i:6:p:1197-1216

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