# 17-103/I (2017-11-03)

Author(s)
Jan (J.P.M.) Heufer, Erasmus University Rotterdam, Erasmus School of Economics; Tinbergen Institute, The Netherlands; Per Hjertstrand, Research Institute of Industrial Economics
Keywords:
Graphical Analysis, Homotheticity, Money Metric Utility, Recoverability, Revealed Preference
JEL codes:
C14, C91, D11, D12

We propose a method to recover homothetic preferences from choice data with minor optimization or measurement errors. Our method allows for a more detailed graphical analysis to reveal subjects' preferences and to choose appropriate functional forms for parametric analysis. It can also be used to extend applications of the money metric function, such as parametric recoverability as introduced by Halevy et al. (2017). It can also improve nonparametric comparison of preferences as suggested by Heufer (2014).