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The principle of revealed preference is the backbone of structural empirical work on consumer demand. It focuses on what we can learn about the processes by which economic agents make decisions, using observed choices and minimal auxiliary assumptions. Classical revealed preference methods assume that choices and preferences are stable and consistent, but many studies have found violations of these assumptions both in consumer data and experimental settings. Recent research effort extends far beyond the axiomatic characterization of neoclassical choice models. New behavioural theories explain these violations in a theoretically founded way, considering data consistency and preference recoverability for a wide class of behavioural models. This article reviews some of the themes emerging from the recent literature.

This paper develops a revealed preference method to set-identify the degree of price inattention at the individual level, in a non-experimental, multi-good setting. Necessary and sufficient conditions for consistency with a particular type of price inattention are derived, and used to recover individual-specific sets from household scanner data. This price inattention model significantly outperforms its standard counterpart for most specifications of price inattention considered. The minimum and maximum degrees of inattention are generally small, but vary considerably across households and have significant correlations with household characteristics. These results provide further evidence that heterogeneity in price inattention is empirically important.