How demanding is the revealed preference approach to demand

Timothy Beatty and Ian Crawford

No CWP17/10, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: A well known problem with revealed preference methods is that when data are found to satisfy their restrictions it is hard to know whether this should be viewed as a triumph for economic theory, or a warning that these conditions are so undemanding that almost anything goes. This paper allows researchers to make this distinction. Our approach builds on theoretical support in the form of an axiomatic cardinal characterisation of a measure of predictive success due to Selten(1991). We illustrate the idea using a large, nationally representative panel survey of Spanish consumers with broad commodity coverage. The results show that this approach to revealed preference methods can lead us radically to reassess our view of the empirical performance of economic theory.

Date: 2010-06-27
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Citations: View citations in EconPapers (22)

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Related works:
Journal Article: How Demanding Is the Revealed Preference Approach to Demand? (2011)
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