Nonparametric analysis of random utility models

Yuichi Kitamura and Jörg Stoye

No 27/16, CeMMAP working papers from Institute for Fiscal Studies

Abstract: This paper develops and implements a nonparametric test of Random Utility Models. The motivating application is to test the null hypothesis that a sample of cross-sectional demand distributions was generated by a population of rational consumers. We test a necessary and sucient condition for this that does not rely on any restriction on unobserved heterogeneity or the number of goods. We also propose and implement a control function approach to account for endogenous expenditure. An econometric result of independent interest is a test for linear inequality constraints when these are represented as the vertices of a polyhedron rather than its faces. An empirical application to the U.K. Household Expenditure Survey illustrates computational feasibility of the method in demand problems with 5 goods.

Date: 2016-06-14
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https://www.cemmap.ac.uk/wp-content/uploads/2020/08/CWP2716.pdf (application/pdf)

Related works:
Journal Article: Nonparametric Analysis of Random Utility Models (2018)
Working Paper: Nonparametric Analysis of Random Utility Models (2018)
Working Paper: Nonparametric analysis of random utility models (2017)
Working Paper: Nonparametric analysis of random utility models (2017)
Working Paper: Nonparametric analysis of random utility models (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:azt:cemmap:27/16

DOI: 10.1920/wp.cem.2016.2716

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