TY - JOUR
T1 - What Types are There?
AU - Cosaert, Sam
PY - 2019/2/15
Y1 - 2019/2/15
N2 - Preferences differ in the population, and this heterogeneity may not be adequately described by observed characteristics and additive error terms. As a first contribution, this study shows that preference heterogeneity can be represented graphically by means of violations of the Weak Axiom of Revealed Preference (WARP), and that computing the minimum number of partitions necessary to break all WARP violations in the sample is equivalent to computing the chromatic number of this graph. Second, the study builds the bridge between revealed preference theory and cluster analysis to assign individuals to these partitions (i.e. preference types). The practical methods are applied to Dutch labour supply data, to recover reservation wages of individuals who belong to particular preference types.
AB - Preferences differ in the population, and this heterogeneity may not be adequately described by observed characteristics and additive error terms. As a first contribution, this study shows that preference heterogeneity can be represented graphically by means of violations of the Weak Axiom of Revealed Preference (WARP), and that computing the minimum number of partitions necessary to break all WARP violations in the sample is equivalent to computing the chromatic number of this graph. Second, the study builds the bridge between revealed preference theory and cluster analysis to assign individuals to these partitions (i.e. preference types). The practical methods are applied to Dutch labour supply data, to recover reservation wages of individuals who belong to particular preference types.
KW - chromatic number
KW - constrained clustering
KW - labour supply
KW - preference heterogeneity
KW - revealed preference
UR - https://link.springer.com/article/10.1007/s10614-017-9752-y
UR - http://www.mendeley.com/research/types-4
U2 - 10.1007/s10614-017-9752-y
DO - 10.1007/s10614-017-9752-y
M3 - Article
SN - 0927-7099
VL - 53
SP - 533
EP - 554
JO - Computational Economics
JF - Computational Economics
IS - 2
ER -