This lecture address the following two key criticisms of the empirical application of revealed preference theory: When the RP conditions do not reject, they do not provide precise predictions; and when they do reject, they do not help characterize the nature of irrationality or the degree/direction of changing tastes. Recent developments in the application of RP theory are shown to have rendered these criticisms unfounded. A powerful test of rationality is available that also provides a natural characterization of changing tastes. Tight bounds on demand responses and on the welfare costs of relative price and tax changes are also available and are shown to work well in practice.
Authors
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Journal article details
- DOI
- 10.1162/jeea.2005.3.2-3.211
- Publisher
- Wiley
- JEL
- D11, D12, C14
- Issue
- Volume 3, Issue 2-3, April 2005
Suggested citation
Blundell, R. (2005). 'How Revealing is Revealed Preference?' 3, Issue 2-3(2005)
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