Goods Versus Characteristics: Dimension Reduction and Revealed Preference

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.Characteristics; demand; dimension reduction; nested models; revealed preference

Goods versus characteristics: dimension reduction and revealed preference

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.Characteristics; demand; dimension reduction; nested models; revealed preference.

Revealed Preference in a Discrete Consumption Space

We show that an agent maximizing some utility function on a discrete (as opposed to continuous) consumption space will obey the generalized axiom of revealed preference (GARP) so long as the agent obeys cost efficiency. Cost efficiency will hold if there is some good, outside the set of goods being studied by the modeler, that can be consumed by the agent in continuous quantities. An application of Afriat's Theorem then guarantees that there is a strictly increasing utility function on the discrete consumption space that rationalizes price and demand observations in that space.Generalized axiom of revealed preference; Afriat's Theorem; discrete demand; utility maximization

A lattice test for additive separability

The author gratefully acknowledges financial support from the European Research Council (ERC) under ERC-2009-AdG grant agreement number 249529.We derive necessary and sufficient conditions for a finite data set of price and demand observations to be consistent with an additively separable preference. We do so without imposing concavity on any of the subutility functions or convexity of the budget set a priori, thereby generalizing earlier results. Our simple and intuitive lattice test easily accommodates departures from rationality, or errors, which subsequently facilitates a rich empirical analysis. We apply our econometric techniques to the food consumption of a panel of British households. The primary empirical finding is that additive separability has considerable success in explaining the data.Publisher PD

Revealed preferences over risk and uncertainty

Revised 16 April 2019. Ludovic Renou would like to acknowledge financial support from the French National Research Agency (ANR), under the grant CIGNE (ANR-15-CE38-0007-01).We develop a nonparametric procedure, called the lattice method, for testing the consistency of contingent consumption data with a broad class of models of choice under risk and under uncertainty. Our method allows for risk loving and elation seeking behavior and can be used to calculate, via Afriat's efficiency index, the magnitude of violations from a particular model of choice. We evaluate the performance of different models (including expected utility, disappointment aversion, rank dependent utility, mean-variance utility, and stochastically monotone utility) in the data collected by Choi et al. (2007), in terms of pass rates, power, and predictive success.Publisher PDFPublisher PD

Rationalizability, Cost-Rationalizability, and Afriat's Efficiency Index

This note explains the equivalence between approximate rationalizability and approximate cost-rationalizability within the context of consumer demand. In connection with these results, we interpret Afriat's (1973) critical cost efficiency index (CCEI) as a measure of approximate rationalizability through cost inefficiency, in the sense that an agent is spending more money than is required to achieve her utility targets

Money Pumps and Bounded Rationality

The standard criterion of rationality in economics is the maximization of a utility function that is stable across multiple observations of an agent's choice behavior. In this paper, we discuss two notions of the money pump that characterize two corresponding notions of utility-maximization. We explain the senses in which the amount of money that can be pumped from a consumer is a useful measure of the consumer's departure from utility-maximization

Demand analysis with partially observed prices

In empirical demand, industrial organization, and labor economics, prices are often unobserved or unobservable since they may only be recorded when an agent transacts. In the absence of any additional information, this partial observability of prices is known to lead to a number of identi?cation problems. However, in this paper, we show that theory-consistent demand analysis remains feasible in the presence of partially observed prices, and hence partially observed implied budget sets, even if we are agnostic about the nature of the missing prices. Our revealed preference approach is empirically meaningful and easy to implement. We illustrate using simple examples

2-Deoxy-2-[F-18]fluoro-D-glucose Joint Uptake on Positron Emission Tomography Images: Rheumatoid Arthritis Versus Osteoarthritis

Purpose: Previous positron emission tomography (PET) studies have shown increased 2-deoxy-2-[18F]fluoro-D-glucose (FDG) uptake in joints of patients with osteoarthritis (OA) and inflamed joints of patients with rheumatoid arthritis (RA). This study compares FDG uptake in joints of RA and OA patients and FDG-uptake with clinical signs of inflammation. Procedures: FDG-PET scans of hands and wrists were performed in patients with RA and primary OA. PET data were compared with clinical data. Results: 29 % of RA joints and 6 % of OA joints showed elevated FDG-uptake. The level of uptake in PET-positive OA joints was not significantly different from that in RA joints. The majority of PET results of RA joints corresponded with clinical findings. Clinical synovitis was found some OA joints with FDG-uptake. Conclusions: FDG-uptake was observed in the majority of clinically inflamed RA joints and in a few OA joints with no significant difference in uptake level. The latter may be due to secondary synovitis