Goods versus characteristics: dimension reduction and revealed preference

Matthew Polisson

No W12/02, IFS Working Papers from Institute for Fiscal Studies

Abstract:

This paper compares the goods and characteristics models of the consumer within a non-parametric revealed preference framework. Of primary interest is to make a comparison on the basis of predictive success that takes into account dimension reduction. This allows us to nonparametrically identify the model which best fits the data. We implement these procedures on household panel data from the UK milk market. The primary result is that the better fit of the characteristics model is entirely attributable to dimension reduction.

Keywords: Characteristics; demand; dimension reduction; nested models; revealed preference. (search for similar items in EconPapers)
JEL-codes: D11 D12 (search for similar items in EconPapers)
Date: 2012-03-01
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Related works:
Working Paper: Goods Versus Characteristics: Dimension Reduction and Revealed Preference (2011)
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