Nonparametric Analysis of Random Utility Models Robust to Nontransitive Preferences
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arXiv
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| Format: | Preprint |
| Publié: |
2024
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| _version_ | 1866929392210411520 |
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| author | Youmbi, Wilfried |
| author_facet | Youmbi, Wilfried |
| contents | The Random Utility Model (RUM) is the gold standard in describing the behavior of a population of consumers. The RUM operates under the assumption of transitivity in consumers' preference relationships, but the empirical literature has regularly documented its violation. In this paper, I introduce the Random Preference Model (RPM), a novel framework for understanding the choice behavior in a population akin to RUMs, which preserves monotonicity and accommodates nontransitive behaviors. The primary objective is to test the null hypothesis that a population of rational consumers generates cross-sectional demand distributions without imposing constraints on the unobserved heterogeneity or the number of goods. I analyze data from the UK Family Expenditure Survey and find evidence that contradicts RUMs and supports RPMs. These findings underscore RPMs' flexibility and capacity to explain a wider spectrum of consumer behaviors compared to RUMs. This paper generalizes the stochastic revealed preference methodology of McFadden & Richter (1990) for finite choice sets to settings with nontransitive and possibly nonconvex preference relations. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2406_13969 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Nonparametric Analysis of Random Utility Models Robust to Nontransitive Preferences Youmbi, Wilfried Theoretical Economics The Random Utility Model (RUM) is the gold standard in describing the behavior of a population of consumers. The RUM operates under the assumption of transitivity in consumers' preference relationships, but the empirical literature has regularly documented its violation. In this paper, I introduce the Random Preference Model (RPM), a novel framework for understanding the choice behavior in a population akin to RUMs, which preserves monotonicity and accommodates nontransitive behaviors. The primary objective is to test the null hypothesis that a population of rational consumers generates cross-sectional demand distributions without imposing constraints on the unobserved heterogeneity or the number of goods. I analyze data from the UK Family Expenditure Survey and find evidence that contradicts RUMs and supports RPMs. These findings underscore RPMs' flexibility and capacity to explain a wider spectrum of consumer behaviors compared to RUMs. This paper generalizes the stochastic revealed preference methodology of McFadden & Richter (1990) for finite choice sets to settings with nontransitive and possibly nonconvex preference relations. |
| title | Nonparametric Analysis of Random Utility Models Robust to Nontransitive Preferences |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2406.13969 |