Explore the vast range of titles available.

An important goal of empirical demand analysis is choice and welfare prediction on counterfactual budget sets arising from potential policy interventions. Such predictions are more credible when made without arbitrary functional-form/distributional assumptions, and instead based solely on economic rationality, that is, that choice is consistent with utility maximization by a heterogeneous population. This paper investigates nonparametric economic rationality in the empirically important context of binary choice. We show that under general unobserved heterogeneity, economic rationality is equivalent to a pair of Slutsky-like shape restrictions on choice-probability functions. The forms of these restrictions differ from Slutsky inequalities for continuous goods. Unlike McFadden–Richter’s stochastic revealed preference, our shape restrictions (a) are global, that is, their forms do not depend on which and how many budget sets are observed, (b) are closed form, hence easy to impose on parametric/semi/nonparametric models in practical applications, and (c) provide computationally simple, theory-consistent bounds on demand and welfare predictions on counterfactual budge sets.

In the study of Giffen behavior or \"Giffenity\", there remains a paradox. On the one hand, the Wold-Juréen (1953) utility function has been touted as the progenitor of a multi-decade search for those two-good, particular utility functions, which exhibit Giffenity. On the other hand, there is no evidence that the Wold-Juréen (1953) utility function has ever been fully evaluated for Giffenity, with perhaps one minor exception, Weber (The case of a Giffen good: Comment, 1997). But there, Weber showed that the Giffenity of Good 1 depends upon the relative magnitude of income vis-à-vis the price of Good 2. Weber's precondition is so vague that it lacks broad appeal. This paper offers a new and a clear cut precondition for Giffen behavior under the Wold-Juréen (1953) utility function. That is, we show that if the price of Good 1 is greater than or equal to the price of Good 2, then Good 1 is a Giffen good.