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Testing The Significance Of The Departures From Utility Maximization

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  • de PERETTI, PHILIPPE

Abstract

This paper introduces a general procedure that tests the significance of the departures from utility maximization, departures defined as violations of the general axiom of revealed preference (GARP). This general procedure is based on (i) an adjustment procedure that computes the minimal perturbation in order to satisfy GARP by using the information content in the transitive closure matrix and (ii) a test procedure that checks the significance of the necessary adjustment. This procedure can be easily implemented and programmed, and we run Monte Carlo simulations to show that it is quite powerful.

Suggested Citation

  • de PERETTI, PHILIPPE, 2005. "Testing The Significance Of The Departures From Utility Maximization," Macroeconomic Dynamics, Cambridge University Press, vol. 9(3), pages 372-397, June.
    • Handle: RePEc:cup:macdyn:v:9:y:2005:i:03:p:372-397_04
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    Cited by:

    1. Ryadh M. Alkhareif & William A. Barnett, 2012. "Divisia Monetary Aggregates for the GCC Countries," International Symposia in Economic Theory and Econometrics, in: Recent Developments in Alternative Finance: Empirical Assessments and Economic Implications, pages 1-37, Emerald Group Publishing Limited.
    2. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    3. Matthijs van Veelen & Roy van der Weide, 2008. "A Note on Different Approaches to Index Number Theory," American Economic Review, American Economic Association, vol. 98(4), pages 1722-1730, September.
    4. Barnett, William A. & de Peretti, Philippe, 2009. "Admissible Clustering Of Aggregator Components: A Necessary And Sufficient Stochastic Seminonparametric Test For Weak Separability," Macroeconomic Dynamics, Cambridge University Press, vol. 13(S2), pages 317-334, September.
    5. Smeulders, Bart & Crama, Yves & Spieksma, Frits C.R., 2019. "Revealed preference theory: An algorithmic outlook," European Journal of Operational Research, Elsevier, vol. 272(3), pages 803-815.
    6. Bergh , Andreas & Nilsson, Therese, 2008. "Do economic liberalization and globalization increase income inequality?," Working Papers 2008:12, Lund University, Department of Economics.
    7. Ali Jadidzadeh & Apostolos Serletis, 2019. "The Demand for Assets and Optimal Monetary Aggregation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(4), pages 929-952, June.
    8. Binner, Jane M. & Bissoondeeal, Rakesh K. & Elger, C. Thomas & Jones, Barry E. & Mullineux, Andrew W., 2009. "Admissible monetary aggregates for the euro area," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 99-114, February.
    9. Jones, Barry E. & Stracca, Livio, 2006. "Are money and consumption additively separable in the euro area? A non-parametric approach," Working Paper Series 704, European Central Bank.
    10. Fleissig, Adrian R. & Whitney, Gerald A., 2008. "A nonparametric test of weak separability and consumer preferences," Journal of Econometrics, Elsevier, vol. 147(2), pages 275-281, December.
    11. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, December.
    12. Binner, Jane M. & Chaudhry, Sajid & Kelly, Logan & Swofford, James L., 2018. "“Risky” monetary aggregates for the UK and US," Journal of International Money and Finance, Elsevier, vol. 89(C), pages 127-138.
    13. Du, Zaichao, 2014. "Testing for serial independence of panel errors," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 248-261.
    14. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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