American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Mutually Consistent Revealed Preference Demand Predictions
American Economic Journal: Microeconomics
vol. 12,
no. 1, February 2020
(pp. 42–74)
Abstract
Revealed preference restrictions are increasingly used to predict demand behavior at new budgets of interest and as shape restrictions in nonparametric estimation exercises. However, the restrictions imposed are not sufficient for rationality when predictions are made at multiple budgets. I highlight the non-convexities in the set of predictions that arise when making multiple predictions. I develop a mixed integer programming characterization of the problem that can be used to impose rationality on multiple predictions. The approach is applied to the UK Family Expenditure Survey to recover rational demand predictions with substantially reduced computational resources compared to known alternatives.Citation
Adams, Abi. 2020. "Mutually Consistent Revealed Preference Demand Predictions." American Economic Journal: Microeconomics, 12 (1): 42–74. DOI: 10.1257/mic.20150216Additional Materials
JEL Classification
- C61 Optimization Techniques; Programming Models; Dynamic Analysis
- D11 Consumer Economics: Theory
- D12 Consumer Economics: Empirical Analysis
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