ON NONPARAMETRIC DEMAND ANALYSIS

Building on the work of Afriat and Varian, a nonparametric analysis of consumption behavior is presented. Inner-bound and outer-bound repres entations of preferences are obtained that are consistent with both th e data and consumer theory. It is shown how a priori information on de mand response can be incorporated in the analysis. The approach genera tes estimates of price and income elasticities of demand. An applicati on to U.S. consumption data illustrates the usefulness of the method f or predicting demand behavior as well as for welfare analysis.