How many types are there?*. (10th October 2012)

• Record Type: Journal Article
• Authors: Crawford, Ian; Pendakur, Krishna
• Is Part Of: Economic journal. Volume 123:Number 567(2013)
• Page Start: 77
• Page End: 95
• Publication Date: 2012-10-10
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; 330.05
• DOI: 10.1111/j.1468-0297.2012.02545.x
• Languages: English
• ISSNs: 0013-0133

Abstract

<abstract abstract-type="main" xml:lang="en"> <title> <x xml:space="preserve">Abstract</x> </title> <p>We consider a revealed preference‐based method that will bound the minimal partition of consumer microdata into a set of preference types such that the data are perfectly rationalisable by standard utility theory. This provides a simple, non‐parametric and theory‐driven way of investigating unobserved preference heterogeneity in empirical data, and easily extends to any choice model which has a revealed preference characterisation. We illustrate the approach using survey data and find that the number of types is remarkably few relative to the sample size – only four or five types are necessary to fully rationalise all observed choices in a data set with 500 observations of choice vectors.</p> </abstract>