Homothetic Preferences Revealed
Tinbergen Institute Discussion Paper 2017-103/I
15 Pages Posted: 6 Nov 2017 Last revised: 25 Aug 2020
Date Written: October 1, 2017
We propose a method to recover homothetic preferences from choice data with minor optimization or measurement errors. Our method allows for a more detailed graphical analysis to reveal subjects' preferences and to choose appropriate functional forms for parametric analysis. It can also be used to extend applications of the money metric function, such as parametric recoverability as introduced by Halevy et al. (2017). It can also improve nonparametric comparison of preferences as suggested by Heufer (2014).
Keywords: Graphical Analysis, Homotheticity, Money Metric Utility, Recoverability, Revealed Preference
JEL Classification: C14, C91, D11, D12
Suggested Citation: Suggested Citation