General Revealed Preference Tests of Weak Separability and Utility Maximization with Incomplete Adjustment

42 Pages Posted: 14 Oct 2020

See all articles by Per Hjertstrand

Per Hjertstrand

Research Institute of Industrial Economics (IFN)

James L. Swofford

University of South Alabama

Gerald Whitney

University of New Orleans

Date Written: March 31, 2020

Abstract

We propose more general non-parametric revealed preference tests for weak separability and utility maximization with incomplete adjustment. Hence, these procedures account for a decision maker’s inability to adjust his optimal allocation of the demanded goods and assets. Incomplete adjustment is especially important when modelling preferences of durable goods and assets. The procedures are based on a computationally attractive integer programming approach. Two empirical applications show that it is important to account for incomplete adjustment in consumer demand models of durable consumption goods and monetary assets.

Suggested Citation

Hjertstrand, Per and Swofford, James L. and Whitney, Gerald, General Revealed Preference Tests of Weak Separability and Utility Maximization with Incomplete Adjustment (March 31, 2020). IFN Working Paper No. 1327, Available at SSRN: https://ssrn.com/abstract=3680505 or http://dx.doi.org/10.2139/ssrn.3680505

Per Hjertstrand (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

James L. Swofford

University of South Alabama ( email )

307 University Blvd
Mobile, AL 36688
United States

Gerald Whitney

University of New Orleans ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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