Abstract
The authors (listed alphabetically) thank Miguel Costa-Gomes, Carlos Cueva and the University of St Andrews for an Impact Fund grant that was awarded in October 2017 and made the development of Prest possible.
Highlights
Revealed preference analysis revolves around the theoretical identification and empirical testing of falsifiable restrictions on people’s observable choice behavior that are necessary and/or sufficient for it to be thought of as being compatible with some theoretical model of preference-maximizing choice
This methodological approach originates in the works of Samuelson (1938), Houthakker (1950), Arrow (1959), Richter (1966) and Afriat (1967), who focused on the textbook model of rational choice that portrays the decision maker as maximizing a complete, transitive and stable binary preference relation on a set of choice alternatives
The vast literature generated by these works has contributed in essential ways to the empirical analysis of individual and collective decision making under certainty, risk and uncertainty, in both budget-constrained and more general choice domains
Summary
Revealed preference analysis revolves around the theoretical identification and empirical testing of falsifiable restrictions (or “axioms”) on people’s observable choice behavior that are necessary and/or sufficient for it to be thought of as being compatible with some theoretical model of preference-maximizing choice. The resulting computer programs allow the user to test if a given budgetary dataset complies with certain axioms of choice consistency, or to compute various indices that are suggestive of “how close” a given decision maker’s choices are to the model of rational choice/utility maximization. Despite the plethora of choice-theoretic models that are operational on discrete finite sets of general alternatives in non-budgetary environments and predict rational as well
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