Revealed Preference with Limited Consideration

descriptionPublicationkeyboard_double_arrow_right Article , Research , Other literature type , Preprint 01 Jan 2014 Netherlands, Belgium English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Demuynck, Thomas; Seel, Christian;

doi: 10.2139/ssrn.2509353 , 10.1257/mic.20150343

handle: 2013/ULB-DIPOT:oai:dipot.ulb.ac.be:2013/251989

Revealed Preference with Limited Consideration

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Abstract

We derive revealed preference tests for models where individuals use consideration sets to simplify their consumption problem. Our basic test provides necessary and sufficient conditions for consistency of observed choices with the existence of consideration set restrictions. The same conditions can also be derived from a model in which the consideration set formation is endogenous and based on subjective prices. By imposing restrictions on these subjective prices, we obtain additional refined revealed preference tests. We illustrate and compare the performance of our tests by means of a dataset on household consumption choices. (JEL D11, D12, M31)

Countries

Netherlands, Belgium

Related Organizations

Maastricht University
Netherlands
Université Libre de Bruxelles
Belgium

Keywords

COLLECTIVE MODEL, REFERENCE PRICE RESEARCH, CONSIDERATION SETS, CONSUMPTION, Theory; Consumer Economics: Empirical Analysis; Criteria for Decision-Making under Risk and Uncertainty; [Consumer Economics], CHOICE, EMPIRICAL TESTS, AFRIATS THEOREM, SEARCH, GOODNESS-OF-FIT, Economie, BEHAVIOR, jel: jel:D81, jel: jel:D11, jel: jel:D12

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