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Working Paper No. 1430

Nonparametric Analysis of the Mixed-Demand Model

Working Paper
Hjertstrand, Per (2022). “Nonparametric Analysis of the Mixed-Demand Model”. IFN Working Paper No. 1430. Stockholm: Research Institute of Industrial Economics (IFN).

Per Hjertstrand

The mixed-demand model allows for very flexible specification of what should be considered endogenous and exogenous in demand system estimation. This paper introduces a revealed preference framework to analyze the mixed-demand model. The proposed methods can be used to test whether observed data (with measurement errors) are consistent with the mixed-demand model and calculate goodness-of-fit measures. The framework is purely non-parametric in the sense that it does not require any functional form assumptions on the direct or indirect utility functions. The framework is applied to demand data for food and provides the first nonparametric empirical analysis of the mixed-demand model.