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- Title
TESTING THE SIGNIFICANCE OF THE DEPARTURES FROM UTILITY MAXIMIZATION.
- Authors
PHILIPPE de PERETTI
- 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.
- Subjects
PERTURBATION theory; UTILITY functions; MONTE Carlo method; MATHEMATICAL models; FUNCTIONAL analysis
- Publication
Macroeconomic Dynamics, 2005, Vol 9, Issue 3, p372
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100505040241