Revealed Preference with Limited Consideration

Thomas Demuynck; Christian Seel

doi:10.1257/mic.20150343

Revealed Preference with Limited Consideration

Thomas Demuynck^*, Christian Seel

^*Corresponding author for this work

Microeconomics & Public Economics

Research output: Contribution to journal › Article › Academic › peer-review

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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.

Original language	English
Pages (from-to)	102-131
Number of pages	30
Journal	American Economic Journal-Microeconomics
Volume	10
Issue number	1
Early online date	2017
DOIs	https://doi.org/10.1257/mic.20150343
Publication status	Published - Feb 2018

Keywords

REFERENCE PRICE RESEARCH
GOODNESS-OF-FIT
CONSIDERATION SETS
COLLECTIVE MODEL
AFRIATS THEOREM
EMPIRICAL TESTS
CONSUMPTION
CHOICE
BEHAVIOR
SEARCH

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10.1257/mic.20150343

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Replication data for: Revealed Preference with Limited Consideration
Seel, C. (Creator) & Demuynck, T. (Contributor), ICPSR, 12 Oct 2019
DOI: 10.3886/e114351v1, https://doi.org/10.3886%2Fe114351v1
Dataset/Software: Dataset

Cite this

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AB - 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.

KW - REFERENCE PRICE RESEARCH

KW - GOODNESS-OF-FIT

KW - CONSIDERATION SETS

KW - COLLECTIVE MODEL

KW - AFRIATS THEOREM

KW - EMPIRICAL TESTS

KW - CONSUMPTION

KW - CHOICE

KW - BEHAVIOR

KW - SEARCH

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DO - 10.1257/mic.20150343

M3 - Article

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SP - 102

EP - 131

JO - American Economic Journal-Microeconomics

JF - American Economic Journal-Microeconomics

IS - 1

ER -

Revealed Preference with Limited Consideration

Abstract

Keywords

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