Improving Revealed Preference Bounds on Demand Responses

There are three key dimensions by which revealed preference bounds on consumer demand responses to price variation can be improved. The first relates to the improvements that arise from using expansion paths for given relative prices, E-bounds. The second concerns the addition of new price information. Thirdly, there are improvements due to assuming separability. Our previous research has examined the first two cases. In this paper we show how to impose these separability assumptions within a fully nonparametric analysis and distinguish between weak and homothetic separability. We also apply these ideas to the analysis of demand responses using UK household level data.