Demand Systems Without Errors

Abstract

This paper describes a novel method for combining revealed preference analysis in the tradition of Afriat (1967, International Economic Review, 8: 76–77) with a statistical demand model. The approach is illustrated with an analysis of the labor supply of the nonneoclassical taxi drivers described in Farber (2005, Journal of Political Economy, 113, no. 1: 46–82; 2008, American Economic Review, 98, no. 2: 1069–1082) and Crawford and Meng (2011, American Economic Review, 101: 1912–1932).