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Testing the Stability of Preferences: A Nonparametric Approach
Author(s) -
Sakong Yong,
Hayes Dermot J.
Publication year - 1993
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1242911
Subject(s) - unobservable , nonparametric statistics , convexity , consumption (sociology) , revealed preference , stability (learning theory) , preference , econometrics , range (aeronautics) , limit (mathematics) , economics , mathematics , mathematical optimization , mathematical economics , statistics , computer science , engineering , mathematical analysis , social science , machine learning , sociology , financial economics , aerospace engineering
A test for preference stability is developed that strengthens existing nonparametric procedures. The test uses indifference curve convexity to restrict (unobservable) compensated consumption bundles. Adding up, noninferiority, and the Slutsky equation are used to limit the range of these compensated consumption bundles. A program is proposed that simultaneously measures the changes in consumption quantities satisfying the theoretical restrictions and the expenditure elasticities minimizing the required changes. The program is applied to meat consumption data and is shown to be capable of detecting small changes in preference.