A Non-Parametric Approach to Heterogeneity Analysis

Avner Seror

Papers from arXiv.org

Abstract: We develop a non-parametric methodology to quantify preference heterogeneity in consumer choices. By repeatedly sampling individual observations and partitioning agents into groups consistent with the Generalized Axiom of Revealed Preferences (GARP), we construct a similarity matrix capturing latent preference structures. Under mild assumptions, this matrix consistently and asymptotically normally estimates the probability that any pair of agents share a common utility function. Leveraging this, we develop hypothesis tests to assess whether demographic characteristics systematically explain unobserved heterogeneity. Simulations confirm the test's validity, and we apply the method to a standard grocery expenditure dataset.

Date: 2025-01, Revised 2025-09
New Economics Papers: this item is included in nep-ecm and nep-net
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