Normality of Demand in a Two-Goods Setting

KU Leuven, Department of Economics, Discussion Paper Series, DPS16.17, September, 2016

24 Pages Posted: 21 Sep 2016

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: September 2, 2016

Abstract

We study the testable implications of normal demand in a two-goods setting. For a finite dataset on prices and quantities, we present the revealed preference conditions for normality of one or both goods. Our characterization provides an intuitive extension of the well-known Weak Axiom of Revealed Preference, and is easy to use in practice. We illustrate the empirical relevance of our theoretical results through an application to the experimental dataset presented in Andreoni and Miller (2002).

Suggested Citation

Cherchye, Laurens and Demuynck, Thomas and de Rock, Bram, Normality of Demand in a Two-Goods Setting (September 2, 2016). KU Leuven, Department of Economics, Discussion Paper Series, DPS16.17, September, 2016, Available at SSRN: https://ssrn.com/abstract=2841142 or http://dx.doi.org/10.2139/ssrn.2841142

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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