Revealed Price Preference: Theory and Empirical Analysis

Rahul Deb, Yuichi Kitamura, John Quah and Jörg Stoye

The Review of Economic Studies, 2023, vol. 90, issue 2, 707-743

Abstract: To determine the welfare implications of price changes in demand data, we introduce a revealed preference relation over prices. We show that the absence of cycles in this relation characterizes a consumer who trades off the utility of consumption against the disutility of expenditure. Our model can be applied whenever a consumer’s demand over a strict subset of all available goods is being analysed; it can also be extended to settings with discrete goods and non-linear prices. To illustrate its use, we apply our model to a single-agent data set and to a data set with repeated cross-sections. We develop a novel test of linear hypotheses on partially identified parameters to estimate the proportion of the population who are revealed better off due to a price change in the latter application. This new technique can be used for non-parametric counterfactual analysis more broadly.

Keywords: Revealed preference; Welfare analysis; Non-parametric counterfactual analysis; C14; D11; D12; D60 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Revealed Price Preference: Theory and Empirical Analysis (2021)
Working Paper: Revealed price preference: theory and empirical analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:90:y:2023:i:2:p:707-743.

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