Investigating the Rational Behavior and Testing the Change in Consumer Preferences of Cereals Bundle in Urban Households in Iran

Document Type : Research Paper

Author

• Hossein Noroozi

PhD Student in Agricultural Economics -, Department of Agricultural Economics, Faculty of Agricultural Economics and Development, University of Tehran, Karaj, Iran.

10.30495/jae.2022.21811.2038

Abstract

Consumer rational behavior is the first and most basic presupposition of the development of economic theories in the field of consumer behavior. Demand studies are correct and investable when the demand and utility model is based on a good approximation of the utility function and the actual demand, and this hypothesis is untestable, so the validity of the rational behavior hypothesis should be fixed and the only test to perform that application of the principles of preferences has been revealed. The existence of a generalized principle of revealed preferences for a series of consumption data is a necessary and sufficient condition for the existence of a concave, continuous, uniform, and irreducible utility function that interprets these observations rationally. The purpose of this study is to investigate the hypothesis of rational behavior and the test of changing the preferences of cereal basket consumers in urban households using the principles of revealed preferences, a non-systematic effects test method for the period 1976-2014.

Keywords

• Consumer Preferences
• Revealed Preferences Axioms
• Neoclassical Utility Function
• Cereals
• Urban Households

---

References

1. Afriat, S.N. (1967) the construction of utility function from expenditure data, International Economic Review, 8, pp 67-77.
2. Burton, M. P., & Young, T. (1991). Nonparametric tests for changes in consumer preferences for meat in Great Britain. Journal of Agricultural Economics, 42 (2): 138–145.
3. Chalfant, J. A., & Alston, J. M. (1988). Accounting for changes in tastes. Journal of Political Economy, 96 (2): 391–410.
4. Conover, W. J. (1999). Practical Nonparametric Statistics, third ed. Wiley, pp. 288–297.
5. De Peretti, P. (2000). Defining money using revealed preference tests with measurement error. Working paper, TEAM University Paris1 Panthéon Sorbonne.
6. Dehghan Dehnavi, M.A., Kohzadi, N. And Khalilian, S. (2003). Nonparametric test of revealed preferences for rational behavior of consumers (urban households). Iranian Economic Research Quarterly, Year 7, Issue 24, pp. 217-197. (In Persian)
7. Famulari, M. (1995). A household-based nonparametric test of demand theory. Review of Economics and Statistics, 77 (2): 372–382.
8. Fevrier, P. and Visser, M. (2005). Measuring Consumer Behavior Using Experimental Data. Available at crest.fr/pageperso/fevrier/fevrier _visser.pdf.
9. Fleissig, A. R., Alastair, R. H. and Seater, J. J. (2000). GARP, Separability and the Representative Agent. Macroeconomic Dynamics, No. 4, PP. 324-342
10. Frechette, D. L., & Jin, H. J. (2002). Distinguishing transitory nonlinear shocks from permanent structural change. Structural Change and Economic Dynamics, 13 (2): 231–248.
11. Goodarzi M. And Mortazavi A.GH. And Peykani Gh. R. (2007). Investigating the demand of the main groups of consumer and food goods in urban areas of Iran and using a two-stage budgeting model. Agricultural Economics and Development. 15 (57) (especially for agricultural markets). (In Persian)
12. Hildenbrand W. (1989). The weak axiom of revealed preference for market demand is strong. Economica, 57(4):979-985.
13. Hosseini, S.S., Noroozi, H., Pakravan Charvadeh, M.R. And Mehrparvar Hosseini. E. (2016). The effect of government protection policies on consumers and producers in the agricultural sector on food security in Iran. Iranian Journal of Agricultural Economics and Development Research. Volume 2-47, Number 3, Page (755-769). (In Persian)
14. Houthakker, H. (1950) Revealed preferences and the utility function, Econometrica, 17,159-174.
15. Jin, H. J. (2006). Verifying timing and frequency of revealed preference violations and application to the BSE outbreak in Japan. Canadian Journal of Agricultural Economics, 54 (1): 139–157.
16. Jin, H. J. (2008). Change in South Korean consumers’ preferences for meat. Food Policy, 33 (1): 74-84.
17. Jin, H. J., & Kim, J. C. (2007). Effects of BSE outbreak in Washington State on agribusiness and food industry firms: an event study approach. Applied Economics, forthcoming.
18. Jin, H. J., & Koo, W.W. (2003). The effects of the BSE outbreak in Japan on consumers’ preferences. European Review of Agricultural Economics, 30 (2), 173–192.
19. Koo, A.Y.C. (1963) an empirical test of revealed preference theory, Econometrica, 31, 646-64.
20. Koo, A.Y.C. (1971) Revealed preference- A structural analysis, Econometrica, 31, 89-97.
21. Salami, H. A. and Shahbazi H. (2009). Application of Implicit Collective Direct Demand System (AIDADS) in explaining the consumption behavior of Iranian households of selected food items. Journal of Agricultural Economics and Development (Agricultural Sciences and Industries). 23. pp. 118- 108. (In Persian)
22. Salami, H. A., & Kavoosi Kalashami, M. 2011. Evaluating structural change in Iranian consumers' preference for rice commodity basket, Agricultural Economics & Development, 1(25): 90-99. (In Persian)
23. Salami, H., & Tahami pour, M. 2012. An Investigation of Changes in Consumer Preferences for Red Vs. Poultry Meat in Iran (An Application of Non-Parametric Test). Iranian Journal of Agricultural Economics and Development Research, 43(2), 157–164. https://doi.org/10.22059/ijaedr.2012.30462. (In Persian)
24. Salami, H., Pakravan, M., & Kavoosi Kalashami, M. 2012. An Investigation of the Structural Change in Urban Iranian Consumers’ Preferences for Tea Using Nonparametric Revealed Preference Test. Iranian Journal of Agricultural Economics and Development Research, 43(3), 341–351. https://doi.org/10.22059/ijaedr.2012.30496. (In Persian)
25. Samuelson, P.A. (1938) A note on the pure theory of consumer behavior, Econometrica, 5, pp 61-71.
26. Samuelson, P.A. (1948) consumption theory in terms of revealed preferences, Econometrica, 15, pp 243-253.
27. Tavana, H. And M., Homayounifar. 2008. Investigating the Rational Behavior of Vegetable Oil Consumers in Iran: A Case Study of Welfare Chain Stores. Journal of Agricultural Economics and Development (Agricultural Sciences and Industries), 22) 2, pp. 70-59. (In Persian)
28. Varian H. R. 2005. Revealed Preference, In Michael Szenberg editor, Samuelson Economics and the 21^st Oxford Scholarship Online. https://oxford.universitypressscholarship.com/view/10.1093/acprof:oso/9780199298839.001.0001/acprof-9780199298839#:~:text=DOI%3A10.1093/acprof%3Aoso/9780199298839.001.0001
29. Varian, H. R. 1990. Goodness-of-Fit for Revealed Preference Tests. University of Michigan. CREST. Working Paper Number 13.
30. Varian, H. R. (1982). The nonparametric approach to demand analysis. Econometrica, 50 (4): 945–973.
31. Varian, H. R. (1983). Non-parametric analysis of optimizing behavior with measurement error. Journal of Econometrics, 30 (1): 445-458.
32. Varian, H. R. (1985). Non-parametric analysis of optimizing behavior with measurement error. Journal of Econometrics, 30 (1): 445-458.
33. Salami, H., Sadafi Abkenar, S. (2019). Measurement of changes in German consumers' preferences for Iranian and American pistachios using non-parametric method of revealed preferences. Iranian Agricultural Economics and Development Research, 50 (1), 79-95. DOI: 22059/IJAEDR.2018.261600.668626.