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American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Revealed Preference with Limited Consideration

  • Thomas Demuynck
  • Christian Seel
American Economic Journal: Microeconomics
vol. 10, no. 1, February 2018
(pp. 102–31)
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Abstract

We derive revealed preference tests for models where individuals use consideration sets to simplify their consumption problem. Our basic test provides necessary and sufficient conditions for consistency of observed choices with the existence of consideration set restrictions. The same conditions can also be derived from a model in which the consideration set formation is endogenous and based on subjective prices. By imposing restrictions on these subjective prices, we obtain additional refined revealed preference tests. We illustrate and compare the performance of our tests by means of a dataset on household consumption choices.

Citation

Demuynck, Thomas, and Christian Seel. 2018. "Revealed Preference with Limited Consideration." American Economic Journal: Microeconomics, 10 (1): 102–31. DOI: 10.1257/mic.20150343

Additional Materials

JEL Classification

  • D11 Consumer Economics: Theory
  • D12 Consumer Economics: Empirical Analysis
  • M31 Marketing
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