Revealed Preferences for Diamond Goods
- American Economic Journal: Microeconomics (Forthcoming)
When consumers care not only for the quantity but also the value of a product,
it could be rational to purchase products as they become more expensive.
This study provides nonparametric—revealed preference—conditions to measure
consumers’ marginal willingness to pay for value (i.e., diamondness) associated
with particular goods. This is the first nonparametric test of price-dependent
preferences. The proposed diamondness measure is applied to observational
data from the Russia Longitudinal Monitoring Survey. The results
show that this diamondness measure is related to a product’s visibility to society,
which indicates a certain degree of conspicuous consumption.
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