The Empirical Content of Binary Choice Models
Papers from arXiv.org
Empirical demand models used for counterfactual predictions and welfare analysis must be rationalizable, i.e. theoretically consistent with utility maximization by heterogeneous consumers. We show that for binary choice under general unobserved heterogeneity, rationalizability is equivalent to a pair of Slutsky-like shape-restrictions on choice-probability functions. The forms of these restrictions differ from Slutsky-inequalities for continuous goods. Unlike McFadden-Richter's stochastic revealed preference, our shape-restrictions (a) are global, i.e. their forms do not depend on which and how many budget-sets are observed, (b) are closed-form, hence easy to impose on parametric/semi/non-parametric models in practical applications, and (c) provide computationally simple, theory-consistent bounds on demand and welfare predictions on counterfactual budget-sets.
New Economics Papers: this item is included in nep-dcm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://arxiv.org/pdf/1902.11012 Latest version (application/pdf)
Working Paper: The Empirical Content of Binary Choice Models (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1902.11012
Access Statistics for this paper
More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().