EconPapers    
Economics at your fingertips  
 

Are Consumers Rational ?Shifting the Burden of Proof

Laurens Cherchye (), Thomas Demuynck (), Bram De Rock () and Joshua Lanier

No 2020-19, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: We present a statistical test for the hypothesis of rational utility maximization on the basis of nonparametric revealed preference conditions. Our test is conservative for the utility maximization hypothesis. We take as null hypothesis that the consumer behaves randomly, and as alternative hypothesis that she is approximately utility maximizing. Our statistical test uses a permutation method to operationalize the principle of random consumer behavior. We show that the test has an asymptotic power of one against the alternative hypothesis of approximately utility maximizing behavior. We also provide simulated power results and two empirical applications (to experimental and observational data, respectively).

Keywords: utility maximization; revealed preferences; random behavior; permutation test (search for similar items in EconPapers)
JEL-codes: D10 (search for similar items in EconPapers)
Pages: 31 p.
Date: 2020-06
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Published by:

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/3075 ... ER-areconsummers.pdf Full text for the whole work, or for a work part (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eca:wpaper:2013/307516

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/307516

Access Statistics for this paper

More papers in Working Papers ECARES from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().

 
Page updated 2021-10-25
Handle: RePEc:eca:wpaper:2013/307516