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Do Large-scale Point-of-sale Data Satisfy the Generalized Axiom of Revealed Preference in Aggregation Using Representative Price Indexes?: A Case Involving Processed Food and Beverages

Hideyasu Sato and 秀保 佐藤

No DP19-2, RCESR Discussion Paper Series from Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University

Abstract: The necessary conditions for data to be rationalized by weakly separable utility functions are verified by aggregation using representative price indexes. For processed food and beverages, the generalized axiom of revealed preference (GARP) is tested using large-scale product-level point-of-sale data. If GARP is not satisfied, the Afriat efficiency index (AEI) is introduced to assess the degree of optimization error. We find that the larger the number of observations in the time series direction, the less likely GARP is to be satisfied. However, the maximum level of AEI is, at most, more than 99.6%, indicating that the degree of the optimization error is small.

Keywords: Aggregation; Revealed preference; Weak separability; POS data (search for similar items in EconPapers)
JEL-codes: C43 D12 Q11 (search for similar items in EconPapers)
Date: 2020-03-30
New Economics Papers: this item is included in nep-agr and nep-upt
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