Non-parametric bounds for non-convex preferences

Yoram Halevy; Dotan Persitz; Lanny Zrill

doi:10.1016/j.jebo.2017.02.006

Non-parametric bounds for non-convex preferences

Yoram Halevy, Dotan Persitz, Lanny Zrill

Coller School of Management

Tel Aviv University

Research output: Contribution to journal › Article › peer-review

Abstract

Choices from linear budget sets are often used to recover consumer's preferences. The classic method uses revealed preference theory to construct non-parametric bounds on the indifference curve that passes through a given bundle. We show that these bounds do not apply to non-convex preferences, and therefore may lead to erroneous predictions and welfare analysis. We suggest an alternative that is based solely on the assumption of monotonicity of preferences.

Original language	English
Pages (from-to)	105-112
Number of pages	8
Journal	Journal of Economic Behavior and Organization
Volume	137
DOIs	https://doi.org/10.1016/j.jebo.2017.02.006
State	Published - 1 May 2017

Keywords

Generalized axiom of revealed preference
Non-convex preferences
Partial identification
Revealed preferences

All Science Journal Classification (ASJC) codes

Economics and Econometrics
Organizational Behavior and Human Resource Management

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10.1016/j.jebo.2017.02.006

Cite this

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abstract = "Choices from linear budget sets are often used to recover consumer's preferences. The classic method uses revealed preference theory to construct non-parametric bounds on the indifference curve that passes through a given bundle. We show that these bounds do not apply to non-convex preferences, and therefore may lead to erroneous predictions and welfare analysis. We suggest an alternative that is based solely on the assumption of monotonicity of preferences.",

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AU - Zrill, Lanny

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N2 - Choices from linear budget sets are often used to recover consumer's preferences. The classic method uses revealed preference theory to construct non-parametric bounds on the indifference curve that passes through a given bundle. We show that these bounds do not apply to non-convex preferences, and therefore may lead to erroneous predictions and welfare analysis. We suggest an alternative that is based solely on the assumption of monotonicity of preferences.

AB - Choices from linear budget sets are often used to recover consumer's preferences. The classic method uses revealed preference theory to construct non-parametric bounds on the indifference curve that passes through a given bundle. We show that these bounds do not apply to non-convex preferences, and therefore may lead to erroneous predictions and welfare analysis. We suggest an alternative that is based solely on the assumption of monotonicity of preferences.

KW - Generalized axiom of revealed preference

KW - Non-convex preferences

KW - Partial identification

KW - Revealed preferences

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DO - 10.1016/j.jebo.2017.02.006

M3 - مقالة

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SP - 105

EP - 112

JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

ER -

Non-parametric bounds for non-convex preferences

Abstract

Keywords

All Science Journal Classification (ASJC) codes

Access to Document

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