Corresponding author: Ian Crawford, Department of Economics, University of Oxford, Manor Road, Oxford, OX1 3UQ, UK. Email: firstname.lastname@example.org.
How many types are there?†
Article first published online: 10 OCT 2012
© 2012 The Author(s). The Economic Journal © 2012 Royal Economic Society
The Economic Journal
Volume 123, Issue 567, pages 77–95, March 2013
How to Cite
Crawford, I. and Pendakur, K. (2013), How many types are there?. The Economic Journal, 123: 77–95. doi: 10.1111/j.1468-0297.2012.02545.x
Pendakur acknowledges the financial support of the SSHRC of Canada; Crawford is grateful for funding through the Centres for Microdata Methods and Practice and Microeconomic Analysis of Fiscal Policy at the IFS. We are very grateful to Soren Arnberg, Richard Blundell, Martin Browning, Andrew Chesher, Simon Sokbae Lee, Arthur Lewbel and J. Peter Neary for helpful comments.
- Issue published online: 26 FEB 2013
- Article first published online: 10 OCT 2012
- Accepted manuscript online: 6 JUL 2012 12:35PM EST
- Submitted: 28 September 2011 Accepted: 13 February 2012
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.