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The generality of the strong axiom

July 3, 2025
ip strategy

CRA’s Cristian Ugarte Caraball recently published “The generality of the strong axiom” in Economic Theory.

The paper studies how choice data can be used to test whether choices align with a strictly concave utility function, which is a widespread assumption in economic research made to simplify the analysis. Dr. Ugarte specifically addresses the challenge of testing this property in the presence of noisy data.

Using a combination of partial efficiency – a common non-parametric method for analyzing choice data – and the Strong Axiom of Revealed Preferences, the paper develops a general test for the strict concavity of the utility function. Applying this test to laboratory data, the study finds that strict concavity is empirically well-supported, suggesting it is not a restrictive assumption in practice.

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