Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145424
Authors: 
Aguiar, Victor H.
Serrano, Roberto
Year of Publication: 
2015
Series/Report no.: 
Working Paper, Brown University, Department of Economics 2015-1
Abstract: 
Given any observed finite sequence of prices, wealth and demand choices, we characterize the relation between its underlying Slutsky matrix norm (SMN) and some popular discrete revealed preference (RP) measures of departures from rationality, such as the Afriat index. We show that testing rationality in the SMN aproach with finite data is equivalent to testing it under the RP approach. We propose a way to "summarize" the departures from rationality in a systematic fashion in finite datasets. Finally, these ideas are extended to an observed demand with noise due to measurement error; we formulate an appropriate modification of the SMN approach in this case and derive closed-form asymptotic results under standard regularity conditions.
Subjects: 
consumer theory
rationality
Slutsky matrix function
revealed preference approach
bounded rationality
JEL: 
C60
D10
Document Type: 
Working Paper

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