# directPrefs: Compute direct and indirect revealed preferences. In revealedPrefs: Revealed Preferences and Microeconomic Rationality

## Description

The directPrefs function computes direct revealed preferences, the indirectPrefs function computes indirect revealed preferences.

## Usage

 1 2 directPrefs(x, p, afriat.par= 1) indirectPrefs(x, p, afriat.par= 1)

## Arguments

 x data frame or matrix containing the observed quantities, where each row corresponds to an observation and the columns are types of goods. p data frame or matrix (of same dimensions as x) containing the corresponding prices. afriat.par the Afriat parameter, real number in [0,1], which allows a certain level of error in the optimization of choices; default is 1, ie. no optimization error allowed.

## Details

Direct preferences are directly computed from matrix multiplication of prices and quantities. Indirect preferences are computed using a variant of the Floyd-Warshall algorithm.

## Value

A matrix of direct or indirect revealed preferences:

 prefs[i, j] = 0 if bundle i is not revealed prefered to bundle j prefs[i, j] = 1 if bundle i is revealed prefered to bundle j prefs[i, j] = 2 if bundle i is strictly revealed prefered to bundle j

## Author(s)

Julien Boelaert jubo.stats@gmail.com

## References

Varian, H. R. (1984) Microeconomic Analysis. New York/London: Norton, 2nd edition, pp 141-143.

## Examples

 1 2 3 4 # Compute direct and indirect preferences of SARP-violating data: data(noSarp) directPrefs(noSarp\$x, noSarp\$p) indirectPrefs(noSarp\$x, noSarp\$p)

### Example output

[,1] [,2] [,3]
[1,]    1    1    0
[2,]    0    1    1
[3,]    1    0    1
[,1] [,2] [,3]
[1,]    1    1    1
[2,]    1    1    1
[3,]    1    1    1

revealedPrefs documentation built on Sept. 5, 2019, 9:04 a.m.