Falsifying The "Goodness" Of Nonmarket Goods With Revealed Preference
Source: Louisiana State University
Some assert that it is impossible to test preference restrictions against revealed preference. The "Goodness" preference restriction simply assumes that one value of a nonmarket good is preferred over another other with any fixed commodity consumption. This paper uses a preference-theoretic methodology to show how goodness can be falsified by revealed preference for compensation-based welfare analysis. When goodness is not directly falsifiable, it is still possible to use revealed preference to set lower bounds on goodness that may be so implausible as to provide an indirect falsification of goodness.