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Working Paper No. 1446

Consistent Subsets: Computing the Houtman-Maks Index in Stata

Working Paper
Hjertstrand, Per and Marcos Demetry (2022). “Consistent Subsets: Computing the Houtman-Maks Index in Stata”. IFN Working Paper No. 1446. Stockholm: Research Institute of Industrial Economics (IFN).

Per Hjertstrand, Marcos Demetry

The Houtman-Maks index is a measure of the size of a violation of utility maximizing (i.e., rational) behavior. This note introduces the Stata command hmindex, which calculates the Houtman-Maks index for a data set of prices and observed choices of a consumer. The command is illustrated with an empirical application.