Revealed preference tests for weak separability: an integer programming approach

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 focus on the revealed preference conditions that characterize the collection of finite data sets that are consistent with the maximization of a weakly separable utility function. From a theoretical perspective, we show that verifying these revealed preference conditions is a difficult problem, i.e. it is np-complete. From a practical perspective, we present an integer programming approach that can verify the revealed preference conditions in a straightforward way, which is particularly attractive in view of empirical analysis. We demonstrate the versatility of this integer programming approach by showing that it also allows for testing homothetic separability and weak separability of the indirect utility function. We illustrate the practical usefulness of the approach by an empirical application to Spanish household consumption data.

Date: 2011-09
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Revealed preference tests for weak separability: An integer programming approach (2015)
Working Paper: Revealed preference tests for weak separability: An integer programming approach (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces11.25

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