Econometrica Vol. 86 No. 6 2018
Nonparametric Analysis of Random Utility Models
Abstract
This paper develops and implements a nonparametric test of random utility models. The motivating application is to test the null hypothesis that a sample of cross‐sectional demand distributions was generated by a population of rational consumers. We test a necessary and sufficient condition for this that does not restrict unobserved heterogeneity or the number of goods. We also propose and implement a control function approach to account for endogenous expenditure. An econometric result of independent interest is a test for linear inequality constraints when these are represented as the vertices of a polyhedral cone rather than its faces. An empirical application to the U.K. Household Expenditure Survey illustrates computational feasibility of the method in demand problems with five goods.
- DOI
- 10.3982/ecta14478
- Volume
- 86
- Issue
- 6
- Pages
- 1883-1909
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref