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Testing revealed preferences for homotheticity with two-good experiments

Published online by Cambridge University Press:  14 March 2025

Jan Heufer
Jan Heufer*
Affiliation:
Department of Economics and Social Science, TU Dortmund University, 44221 Dortmund, Germany
*
[email protected]
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Abstract

It is shown that for two dimensional commodity spaces any homothetic utility function that rationalizes each pair of observations in a set of consumption data also rationalizes the entire set. The result is used to provide a simplified nonparametric test for homotheticity of demand and a measure for homothetic efficiency. The article thus provides a useful tool to screen data for severe violations of homotheticity before estimating parameters of homothetic utility functions. The new test and measure are applied to previously published data.

Keywords

Homothetic efficiencyHomothetic preferencesLaboratory experimentsNonparametric testsRevealed preference

JEL classification

D12: Consumer Economics: Empirical Analysis D11: Consumer Economics: Theory C14: Semiparametric and Nonparametric Methods: General C91: Laboratory, Individual Behavior
Type
Article
Information
Experimental Economics , Volume 16 , Issue 1: Mechanisms and Methodology , March 2013 , pp. 114 - 124
Copyright
Copyright © 2012 Economic Science Association

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Footnotes

Electronic Supplementary Material The online version of this article (doi:https://doi.org/10.1007/s10683-012-9330-z) contains supplementary material, which is available to authorized users.

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