Homothetic Efficiency and Test Power: A Non-Parametric Approach

Arbeitspapier

We provide a nonparametric revealed preference approach to demand analysis based on homothetic efficiency. Homotheticity is a useful restriction but data rarely satisfies testable conditions. To overcome this we provide a way to estimate homothetic efficiency of consumption choices. It generalises Heufer's (2013) two-dimensional concept to arbitrary dimensions and is motivated by a form of rationalisation similar to Halevy et al. (2012). The method allows to recover larger preferred and worse sets and provides considerably more preditive success and discriminatory power against random behaviour. An application to experimental and household expenditure data illustrates the potential of our approach.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 15-064/I

Classification and Topics

• Classification: Wirtschaft ; Semiparametric and Nonparametric Methods: General ; Consumer Economics: Theory ; Consumer Economics: Empirical Analysis
• Subject: Demand Theory ; Efficiency ; Experimental Economics ; Homotheticity ; Non-parametric Analysis ; Revealed Preference ; Utility Maximisation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heufer, Jan ; Hjertstrand, Per
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/111745
• Last update: 10.03.2025, 11:46 AM CET