Measuring consumer surplus with unknown Hicksian demands.

An intuitive, computationally simple, and accurate measure of welfare change is proposed in cases where estimated demand and supply functions do not yield an easily recoverable cost or utility function. This procedure for measuring consumer surplus is based upon what is termed the Slutsky compensate...

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Bibliographic Details
Published in:American Economic Review Vol. 88; no. 1; pp. 314 - 323
Main Authors: Irvine, Ian J., Sims, William A.
Format: Article
Published: American Economic Association March 1998
Subjects:
Online Access:View this record in EBSCOhost
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        atl: Measuring consumer surplus with unknown Hicksian demands.
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        au:
          Irvine, Ian J.
          Sims, William A.
      su:
        Substitution (Economics)
        Consumers' surplus
        Labor supply
        Welfare economics
      sug:
        subj:
          Substitution (Economics)
          Consumers' surplus
          Labor supply
          Welfare economics
      keyword: Slutsky equation
      ab: An intuitive, computationally simple, and accurate measure of welfare change is proposed in cases where estimated demand and supply functions do not yield an easily recoverable cost or utility function. This procedure for measuring consumer surplus is based upon what is termed the Slutsky compensated demand—or supply in the labor case. The error associated with using the Slutsky demand to measure the true compensating variation or equivalent variation yields exceedingly small errors for relatively large price changes.
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    language: English
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