The world beyond GARP: methodological advances in revealed preference theory.

In this doctoral dissertation, I formulate methodological extensions of the revealed preference approach founded by Samuelson (1938, 1948) and Houthakker (1950). The revealed preference approach allows us to impose consistency on observed choices from (usually linear) budget sets. First of all, I modify the standard revealed preference principles to test consistency of choices from finite choice sets. Second, I generalize the narrowly defined revealed preference axioms (GARP in particular) to incorporate psychological realism in the models. Specifically, I will identify preferences for others’ consumption and preferences for value (diamond effects). This fits in Rabin’s (2013) PEEM – portable extensions of existing models – research program, which aims at improving the realism of economic models while still allowing for prediction. Finally, I show how revealed preference techniques can help us estimate the distribution of welfare measures and predict the distribution of demand correspondences in a setting where panel data is unavailable.status: publishe