Revealed Preference Analysis for Convex Rationalizations on Nonlinear Budget Sets

22 Pages Posted: 30 Jan 2013

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Thomas Demuynck

Catholic University of Leuven (KUL) - Faculty of Business and Economics (FBE)

Bram de Rock

Katholieke Universiteit Leuven - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics

Date Written: November 1, 2012

Abstract

We present necessary and sufficient revealed preference conditions to verify whether a finite data set on nonlinear budget sets is consistent with the maximization of a quasi–concave utility function. Our results can be used to test for convexity of the underlying preference relation. We also show that in many settings, our conditions are easy to use in practical applications.

Keywords: quasi–concavity, convex preferences, nonlinear budget sets, revealed preference conditions

JEL Classification: C14, D11

Suggested Citation

Cherchye, Laurens and Demuynck, Thomas and de Rock, Bram, Revealed Preference Analysis for Convex Rationalizations on Nonlinear Budget Sets (November 1, 2012). Available at SSRN: https://ssrn.com/abstract=2208408 or http://dx.doi.org/10.2139/ssrn.2208408

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Thomas Demuynck

Catholic University of Leuven (KUL) - Faculty of Business and Economics (FBE) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Bram De Rock

Katholieke Universiteit Leuven - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics ( email )

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

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