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TESTING THE SIGNIFICANCE OF THE DEPARTURES FROM UTILITY MAXIMIZATION

Abstract : This paper introduces a general procedure that tests the significance of the departures from utility maximization, departures defined as violations of the general axiom of revealed preference (GARP). This general procedure is based on (i) an adjustment procedure that computes the minimal perturbation in order to satisfy GARP by using the information content in the transitive closure matrix and (ii) a test procedure that checks the significance of the necessary adjustment. This procedure can be easily implemented and programmed, and we run Monte Carlo simulations to show that it is quite powerful.
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https://halshs.archives-ouvertes.fr/halshs-00646801
Contributor : Philippe de Peretti <>
Submitted on : Wednesday, November 30, 2011 - 5:37:57 PM
Last modification on : Tuesday, January 19, 2021 - 11:08:28 AM

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Philippe de Peretti. TESTING THE SIGNIFICANCE OF THE DEPARTURES FROM UTILITY MAXIMIZATION. Macroeconomic Dynamics, Cambridge University Press (CUP), 2005, 9, pp.372-397. ⟨10.1017/S1365100505040241⟩. ⟨halshs-00646801⟩

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