Is utility transferable? A revealed preference analysis

Laurens Cherchye, Thomas Demuynck and Bram De Rock

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: We provide a revealed preference analysis of the transferable utility hypothesis, which is widely used in economic models. First, we establish revealed preference conditions that must be satisfied for observed group behavior to be consistent with Pareto efficiency under transferable utility. Next, we show that these conditions are easily testable by means of integer programming methods. The tests are entirely nonparametric, which makes them robust with respect to specification errors. Finally, we demonstrate the practical usefulness of our conditions by means of an application to Spanish consumption data. To the best of our knowledge, this is the first empirical test of the transferable utility hypothesis.

Date: 2011-02
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Is utility transferable? a revealed preference analysis (2015)
Working Paper: Is utility transferable? A revealed preference analysis (2015)
Working Paper: Is Utility Transferable? A Revealed Preference Analysis (2011)
Working Paper: Is Utility Transferable? A Revealed Preference Analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces11.02

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