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The revealed preference approach in economics is central to the empirical analysis of consumer behavior. In this article, we introduce the commands checkax, aei, and powerps as a bundle within the package rpaxioms. The first command allows a user to test whether consumer expenditure data satisfy several revealed preference axioms; the second command calculates measures of goodness of fit when the data violate these axioms; and the third command calculates power against uniformly random behavior as well as predictive success for each axiom. We illustrate the commands using individual-level experimental data and household-level aggregate consumption data. [ABSTRACT FROM AUTHOR]

According to rational choice theory, rational consumers tend to maximize utility under a given budget constraints. This will be achieved if they choose a combination of goods that can satisfy their needs and provide the maximum level of utility. Gary Becker, on the other hand, imagines irrational consumers who choose bundle on the budget line. As irrational consumers have an equal probability of choosing any bundle on the budget line, on average, we expect that they will pick the bundle lying at the midpoint of the line. The results of research in which artificial Becker's agents choose among more than two commodities, rational choice theory is small and more than two budget/price situations show that the percentage of agents whose behavior violate. Adding some factors to Becker's model of random behavior, experimenters can minimize these minor violations. Therefore, rational choice theory is unfalsifiable. The results of our research have confirmed this theory. In addition, in the paper we discussed about explanatory value of rational choice theory in specific circumstances (positive substitution effect) and we concluded that the explanatory value of rational choice theory was significantly reduced in specific cases.

The population of people above 65 years old continues to grow, and there is mounting evidence that as humans age they are more likely to make errors. However, the specific effect of neuroanatomical aging on the efficiency of economic decision-making is poorly understood. We used whole-brain voxel-based morphometry analysis to determine where reduction of gray matter volume in healthy female and male adults over the age of 65 years correlates with a classic measure of economic irrationality: violations of the Generalized Axiom of Revealed Preference. All participants were functionally normal with Mini-Mental State Examination scores ranging between 26 and 30. While our elders showed the previously reported decline in rationality compared with younger subjects, chronological age per se did not correlate with rationality measures within our population of elders. Instead, reduction of gray matter density in ventrolateral prefrontal cortex correlates tightly with irrational behavior. Interestingly, using a large fMRI sample and meta-analytic tool with Neurosynth, we found that this brain area shows strong coactivation patterns with nearly all of the value-associated regions identified in previous studies. These findings point toward a neuroanatomic locus for economic rationality in the aging brain and highlight the importance of understanding both anatomy and function in the study of aging, cognition, and decision-making. [ABSTRACT FROM AUTHOR]

Choices from linear budget sets are often used to recover consumer's preferences. The classic method uses revealed preference theory to construct non-parametric bounds on the indifference curve that passes through a given bundle. We show that these bounds do not apply to non-convex preferences, and therefore may lead to erroneous predictions and welfare analysis. We suggest an alternative that is based solely on the assumption of monotonicity of preferences. [ABSTRACT FROM AUTHOR]

Consumer behavior analysis is a fundamental issue in economics. The most prominent methodology that economists use to attribute preferences according to this principle is the revealed preference concept. Therefore, neoclassical utility function is capable to test the rational behavior hypothesis of consumer. In this paper, we formalize a method of revealed preferences in place of neoclassical utility function to test the hypothesis of rational behavior using the Iranian rural households’ consumption data over the period 1982-2005. According to results, we didn't detect any violations in the whole consumption data. But in agriculture commodities group, we detected 4 violations using generalized Afriat index ascribed to measurement error. overall, the findings of the study confirm the hypothesis of rational behavior. Thus, there exists a utility function that is non-satiated, continuous, monotonic, and concave that rationalizes the consumption data of rural households in Iran

A key criteria in measuring the true cost of living is the absence of non-price rationing. To examine how non-price rationing distorts conventional measures of the cost of living, we examine the case of Belgium following WWI. The economic fallout from WWI to Belgium was so severe that the Commission for Relief in Belgium provided considerable assistance after the war ended. Nonetheless, food shortages persisted even after international assistance ceased in 1919 and production in Belgium did not return to pre-war levels until the end of 1924. A nonparametric revealed preference test for fifteen food categories shows shortages for eggs, butter, potatoes, vegetables, and sugar for periods from 1920 to 1924. Estimated virtual prices for these five foods, in conjunction with actual prices for the other ten goods, show that the actual cost of living was severely underestimated. The virtual prices of these five goods are the prices at which consumers would have willingly paid to purchase them, given the observed quantities, along with their other purchases. In this respect they can be viewed as market clearing prices. Our findings reinforce the view that Belgium's population continued to endure the effects of constrained consumption and a lower standard of living after the war ended. Further the results show how much the welfare of the Belgium people improved when shortages began to decrease. [ABSTRACT FROM AUTHOR]

This Note presents an algorithm for testing the generalized axiom of revealed preference that runs in quadratic time. We show that this algorithm can be used to solve a more general problem on graphs. Furthermore, we prove a lower bound on the running time of any algorithm for testing different axioms of revealed preference. [ABSTRACT FROM AUTHOR]

According to rational choice theory, rational consumers tend to maximize utility under a given budget constraints. This will be achieved if they choose a combination of goods that cannot satisfy their needs and provide the maximum level of utility. Gary Becker imagines irrational consumers who choose bundle on the budget line. As irrational consumers have an equal probability of choosing any bundle on the budget line, on average, we expect that they will pick the bundle lying at the midpoint of the line. The results of research in which artificial Becher's agents choose among more than two commodities rational choice theory is small. And in more than two budget/price situations show that the percentage of agents whose behaviour violate. Adding some factors to Becker's model of random behaviour, experimenters can minimize these minor violations and fit the actor's choice with the theory. In addition, the results of organizations' choices analysis show that the observed agents behave rationally, and this behaviour confirms the theory rational choice. Therefore, rational choice theory is unfalsifiable. As the theory can always fits with the facts, it would have been much more productive if we had admitted that the theory was falsifiable and then debated its explanatory value in specific circumstances. [ABSTRACT FROM AUTHOR]

Obtaining estimates of demand relationships between goods and services during the periods of rationing, that characterized the first half of the twentieth century, is complicated by the uncertainty about both the period and the goods for which rationing is binding. Consequently, researchers have turned to using the difference between virtual and observed prices as an indicator of binding rationing. However, this often requires using external data from another country or an unrationed sample period to estimate virtual prices. In contrast, our methodology uses data from the rationed period to estimate virtual prices. The ration constrained revealed preference approach provides virtual prices that can be used to estimate a system of free demands. We then estimate the impact that rationing had on expenditure on unrationed goods using relationships between free and rationed demand elasticities. We apply our methodology to inter war period data from Belgium. [ABSTRACT FROM AUTHOR]

Two new nonparametric procedures are developed to evaluate the significance of violations of revealed preference found by standard nonstochastic tests. Our tests with high probability correctly detect utility maximization for data generated with measurement error. The procedures are not very sensitive to misspecifying the amount of error that could have caused the data to violate revealed preference. The tests have power against an alternative of random behavior. Both tests fail to reject the null of rational utility maximization from a monetary dataset that has violations of revealed preference. [ABSTRACT FROM AUTHOR]

We give two algorithms that partition data into two subsets, a set consistent with the weak axiom of revealed preference (WARP) and its complement. Our main contribution is a very last, but inexact, algorithm. We also describe an exact algorithm that will be impractical for large data sets. These same algorithms may he applied to several other binary relationships such as the nonparametric production axioms. Because violations of WARP are also violations of the strong (SARP) and generalized (GARP) axioms, these algorithms are a logical first step in computing subsets consistent with these relations. [ABSTRACT FROM AUTHOR]