Nonparametric Engel Curves and Revealed Preference

This paper applies revealed preference theory to the nonparametric statistical analysis of demand. Knowledge of expansion paths is shown to improve the power of nonparametric of revealed preference. The tightest bounds on indifference surfaces and measures are derived using an algorithm for which revealed preference conditions shown to guarantee convergence. Nonparametric Engel curves are used to estimate paths and provide a stochastic structure within which to examine the consistency household level data and revealed preference theory. An application is made to a long series of repeated cross-sections from the Family Expenditure Survey for Britain. The of these data with revealed preference theory is examined. For periods of consistency revealed preference, tight bounds are placed on true cost of living indices.