Checking if Data Violate the WARP A consumer makes the following choices At prices (p1,p2)=($2, $2 the choice Was(X1X2)=(10,1) At(p1, p2 =$2, $1) the choice was (X12x2)=(5,5) At (p,,p2= $1, $2 the choice was (X1x2)=(5,4) Is the WarP violated by these data?
Checking if Data Violate the WARP A consumer makes the following choices: –At prices (p1 ,p2 )=($2,$2) the choice was (x1 ,x2 ) = (10,1). –At (p1 ,p2 )=($2,$1) the choice was (x1 ,x2 ) = (5,5). –At (p1 ,p2 )=($1,$2) the choice was (x1 ,x2 ) = (5,4). Is the WARP violated by these data?
Checking if Data violate the WARP (5,4)×(10,1) (10,1)x(5,4)
Checking if Data Violate the WARP (5,4) (10,1) (10,1) (5,4) x1 x2 D p D p
The Strong Axiom of Revealed Preference(SARP) If the bundle x is revealed (directly or indirectly) as preferred to the bundle y and x* y, then it is never the case that the y is revealed (directly or indirectly) as preferred to x; i.e xy or x冫y not(ysx or y >x)
The Strong Axiom of Revealed Preference (SARP) If the bundle x is revealed (directly or indirectly) as preferred to the bundle y and x y, then it is never the case that the y is revealed (directly or indirectly) as preferred to x; i.e. x y or x y not ( y x or y x ). D p D p I p I p
The Strong Axiom of Revealed Preference What choice data would satisfy the WaRP but violate the sarP?
The Strong Axiom of Revealed Preference What choice data would satisfy the WARP but violate the SARP?
The Strong Axiom of Revealed Preference Consider the following data A:(p1,p2p3)=(1,3,10)&(x1,X2x3)=(3,1,4) B:(P1p2p3)=(4,3,6)&2(x1,X2x3)=(25,3) c:(p1,p23)=(1,1,5)8(x1x2,X3)=(44,3)
The Strong Axiom of Revealed Preference Consider the following data: A: (p1 ,p2 ,p3 ) = (1,3,10) & (x1 ,x2 ,x3 ) = (3,1,4) B: (p1 ,p2 ,p3 ) = (4,3,6) & (x1 ,x2 ,x3 ) = (2,5,3) C: (p1 ,p2 ,p3 ) = (1,1,5) & (x1 ,x2 ,x3 ) = (4,4,3)