Symposium on revealed preference analysis

Abstract

Almost invariably, economic models postulate that agents behave according to some type of maximizing behavior. This is true even of models in behavioral economics, though agents in those settings may be unsophisticated in some way or have preferences that depart from classical assumptions. Revealed preference (RP) analysis investigates the observable implications of economic models and the extent to which the objects of a model, for example, agents’ preferences, can be inferred from data. While RP analysis in this broad sense applies, of course, to a very large part of empirical investigation in economics, that literature which is typically understood by its practitioners as revealed preference analysis has more specific features: In general, the aim of the analysis is not merely to identify and test some empirical implications of a model, but to identify all the observable implications of a model. These implications take the form of restrictions on the data that could, at least in principle, be checked. Since the models being considered are usually sufficiently general that its objects are restricted by qualitative, rather than functional-form or parametric conditions, the same is true of the restrictions on the data. This is an ambitious approach to empirical investigation, and it is probably not practicable to adopt it in all circumstances, but for models that play a central role in economic analysis, it is worthwhile delineating exactly the observable content of the model.