Consumer preferences and demand systems

This paper is an up-to-date survey of the state-of-the art in consumer demand modelling. We review and evaluate advances in a number of related areas, including di¤erent approaches to empirical demand analysis, such as the di¤erential approach, the locally .exible functional forms approach, the semi-nonparametric approach, and a nonparametric approach. We also address estimation issues, including sampling theoretic and Bayesian estimation methods, and discuss the limitations of the currently common approaches. We also highlight the challenge inherent in achieving economic regularity, for consistency with the assumptions of the underlying neoclassical economic theory, as well as econometric regularity, when variables are nonstationary.