Revealed Price Preference: Theory and Empirical Analysis
Rahul Deb (),
John Quah () and
Papers from arXiv.org
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 analyzed; it can also be extended to settings with discrete goods and nonlinear 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 nonparametric counterfactual analysis more broadly.
Date: 2018-01, Revised 2021-04
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Working Paper: Revealed price preference: theory and empirical analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1801.02702
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