A General Revealed Preference Test for Quasi-Linear Preferences: Theory and Experiments

Abstract

We provide a generalized revealed preference test for quasi-linear preferences. The test applies to nonlinear budget sets and nonconvex preferences and can be used in contexts such as taxation and nonlinear pricing. We use this test to evaluate the prevalence of quasi-linear preferences in a laboratory experiment on consumption. We find that half of the subjects who satisfy the Generalized Axiom of Revealed Preferences also satisfy the criteria for quasi-linear preferences.