Revealed preference

About: Revealed preference is a research topic. Over the lifetime, 1824 publications have been published within this topic receiving 57091 citations.

A Note on the Pure Theory of Consumer's Behaviour

Abstract: FROM its very beginning the theory of consumer's choice has marched steadily towards greater generality, sloughing off at successive stages unnecessarily restrictive conditions. From the time of Gossen to our own day we have seen the removal of (a) the assumption of linearity of marginal utility; (b) the assumption of independence of utilities; (c) the assumption of the measurability of utility in a cardinal sense; and (d) even the assumption of an integrable field of preference elements.. The discrediting of utility as a. psychological concept robbed it of its only possible virtue as an explanation -of human behaviour in other than a circular sense, revealing its emptiness as even a construction. As a result the most modern theory confines itself to an analysis of indifference elements, budgetary equilibrium being defined by equivalence of price ratios to respective indifference slopes. Consistently applied, however, the modern criticism turns back on itself and cuts deeply. For just as we do not claim to know by introspection the behaviour of utility, many will argue we cannot know the behaviour of ratios of marginal utilities or of indifference directions. Why should one believe in the increasing rate of marginal substitution, except in so far as it leads to the type of demand functions in the market which seem plausible ? Even on the advanced front we are confronted with this dilemma -either the argument with respect to indifference varieties is circular or to many people inadmissible (at least without further demonstration). Hence, despite the fact that the notion of utility has been repudiated or ignored by modern theory, it is clear that much of even the most modern analysis shows vestigial traces of the utility concept. Thus, to any person not

Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism

Abstract: Subjects in economic laboratory experiments have clearly expressed an interest in behaving unselfishly. They cooperate in prisoners’ dilemma games, they give to public goods, and they leave money on the table when bargaining. While some are tempted to call this behavior irrational, economists should ask if this unselfish and altruistic behavior is indeed self-interested. That is, can subjects’ concerns for altruism or fairness be expressed in the economists’ language of a well-behaved preference ordering? If so, then behavior is consistent and meets our definition of rationality. This paper explores this question by applying the axioms of revealed preference to the altruistic actions of subjects. If subjects adhere to these axioms, such as GARP, then we can infer that a continuous, convex, and monotonic utility function could have generated their choices. This means that an economic model is sufficient to understand the data and that, in fact, altruism is rational. We do this by offering subjects several opportunities to share a surplus with another anonymous subject. However, the costs of sharing and the surplus available vary across decisions. This price and income variation creates budgets for altruistic activity that allow us to test for an underlying preference ordering. We found that subjects exhibit a significant degree of rationally altruistic behavior. Over 98% of our subjects made choices that are consistent with utility maximization. Only a quarter of subjects are selfish money-maximizers, and the rest show varying degrees of altruism. Perhaps most strikingly, almost half of the subjects exhibited behavior that is exactly consistent with one of three standard CES utility functions: perfectly selfish, perfect substitutes, or Leontief. Those with Leontief preferences are always dividing the surplus equally, while those with perfect substitutes preferences give everything away when the price of giving is less than one, but keep everything when the price of giving is greater than one. Using the data on choices, we estimated a population of utility functions and applied these to predict the results of other studies. We found that our results could successfully characterize the outcomes of other studies, indicating still further that altruism can be captured in an economic model.

Economic Valuation with Stated Preference Techniques: a Manual

Abstract: project that requires structured valuation stages, open to the community dimension. The limits of traditional economic analysis should be exceeded by adopting new generally used: Revealed Preference Techniques and Stated Preference Preferences Techniques: A Manual, Edward Elgar: Cheltenham, UK, 2002. Economic valuation with stated preference techniques: a manual. Choice modelling approaches: a superior alternative for environmental valuation? N Hanley.