Transitivity of Preferences: When Doest it Matter ?

Laurens Cherchye, Thomas Demuynck and Bram De Rock

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: We define the empirical conditions on prices and incomes under which transitivityof preferences has specific testable implications. In particular, we set out necessaryand sufficient requirements for budget sets under which consumption choices canviolate SARP (Strong Axiom of Revealed Preferences) but not WARP (Weak Axiomof Revealed Preferences). As SARP extends WARP by additionally imposingtransitive preferences, this effectively defines the conditions under which transitivityis separately testable. Our findings have considerable practical relevance, as transitivityconditions are known to substantially aggravate the computational burden ofempirical revealed preference analysis. Our characterization takes the form of triangularconditions that must hold for all three-element subsets of normalized prices,and which are easy to verify in practice. We demonstrate their practical use throughtwo short empirical applications.

Keywords: revealed preferences; WARP; SARP; transitivity; testable implications (search for similar items in EconPapers)
JEL-codes: C14 D01 D11 D12 (search for similar items in EconPapers)
Pages: 22 p.
Date: 2015-11
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Transitivity of preferences: when does it matter? (2018)
Working Paper: Transitivity of Preferences: When Doest it Matter ? (2018)
Working Paper: Transitivity of preferences: when does it matter? (2015)
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