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Presidential Address: How Revealing Is Revealed Preference?

Author

Listed:
  • Richard Blundell

    (University College London and Institute for Fiscal Studies,)

Abstract

This lecture address the following two key criticisms of the empirical application of revealed preference theory: When the RP conditions do not reject, they do not provide precise predictions; and when they do reject, they do not help characterize the nature of irrationality or the degree/direction of changing tastes. Recent developments in the application of RP theory are shown to have rendered these criticisms unfounded. A powerful test of rationality is available that also provides a natural characterization of changing tastes. Tight bounds on demand responses and on the welfare costs of relative price and tax changes are also available and are shown to work well in practice. (JEL: D11, D12, C14) Copyright (c) 2005 The European Economic Association.

Suggested Citation

  • Richard Blundell, 2005. "Presidential Address: How Revealing Is Revealed Preference?," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 211-235, 04/05.
    • Handle: RePEc:tpr:jeurec:v:3:y:2005:i:2-3:p:211-235
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    Citations

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    Cited by:

    1. Sam Cosaert & Thomas Demuynck, 2018. "Nonparametric Welfare and Demand Analysis with Unobserved Individual Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 349-361, May.
    2. Paola Manzini & Marco Mariotti, 2009. "Consumer choice and revealed bounded rationality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(3), pages 379-392, December.
    3. Lapo Filistrucchi & Damien Geradin & Eric van Damme, 2012. "Identifying Two-Sided Markets," Working Papers - Economics wp2012_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    4. repec:hal:pseose:halshs-01249514 is not listed on IDEAS
    5. Richard Blundell & Joel L. Horowitz & Matthias Parey, 2013. "Nonparametric estimation of a heterogeneous demand function under the Slutsky inequality restriction," CeMMAP working papers CWP54/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    6. Dietrich, Franz & List, Christian, 2016. "Reason-Based Choice And Context-Dependence: An Explanatory Framework," Economics and Philosophy, Cambridge University Press, vol. 32(2), pages 175-229, July.
    7. 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.
    8. Blundell, R. & Browning, M. & Cherchye, L.J.H. & Crawford, I. & de Rock, B. & Vermeulen, F.M.P., 2012. "Sharp for SARP : Nonparametric Bounds on the Behavioural and Welfare Effects of Price Changes," Discussion Paper 2012-065, Tilburg University, Center for Economic Research.
    9. Lombardi, Michele, 2010. "What kind of preference maximization does the weak axiom of revealed non-inferiority characterize?," Mathematical Social Sciences, Elsevier, vol. 59(3), pages 323-325, May.
    10. Adams-Prassl, Abigail, 2019. "Mutually Consistent Revealed Preference Demand Predictions," CEPR Discussion Papers 13580, C.E.P.R. Discussion Papers.
    11. Richard Blundell & Martin Browning & Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2015. "Sharp for SARP: Nonparametric Bounds on Counterfactual Demands," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 43-60, February.
    12. Walter Briec & Kristiaan Kerstens & Ignace Van de Woestyne, 2016. "Congestion in production correspondences," Journal of Economics, Springer, vol. 119(1), pages 65-90, September.
    13. Wang, Jian & Iversen, Tor & Hennig-Schmidt, Heike & Godager, Geir, 2020. "Are patient-regarding preferences stable? Evidence from a laboratory experiment with physicians and medical students from different countries," European Economic Review, Elsevier, vol. 125(C).
    14. Andreas Chai & Nicholas Rohde & Jacques Silber, 2015. "Measuring The Diversity Of Household Spending Patterns," Journal of Economic Surveys, Wiley Blackwell, vol. 29(3), pages 423-440, July.
    15. Jim Engle-Warnick & Natalia Mishagina, 2014. "Insensitivity to Prices in a Dictator Game," CIRANO Working Papers 2014s-19, CIRANO.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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