TESTING THE SIGNIFICANCE OF THE DEPARTURES FROM UTILITY MAXIMIZATION

Philippe de Peretti (1)

1 CES - Centre d'économie de la Sorbonne

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.

Mots clés: weak separability; nonparametric; test

Domaines: Economies et finances

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