The Nonparametric Approach to Applied Welfare Analysis

Donald Brown () and Caterina Calsamiglia ()

No 1507, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

Abstract: Changes in total surplus and deadweight loss are traditional measures of economic welfare. We propose necessary and sufficient conditions for rationalizing consumer demand data with a quasilinear utility function. Under these conditions, consumer surplus is a valid measure of consumer welfare. For nonmarketed goods, we propose necessary and sufficient conditions on market data for efficient production , i.e., production at minimum cost. Under these conditions we derive a cost function for the nonmarketed good, where producer surplus is the area above the marginal cost curve.

Keywords: Welfare economics; Quasilinear utilities; Nonmarketed goods; Afriat inequalities (search for similar items in EconPapers)
JEL-codes: D11 D12 D21 D60 (search for similar items in EconPapers)
Date: 2005-04
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Published in D.J. Brown and F. Kubler, eds., Computational Aspects of General Equilibrium Theory: Refutable Theories of Value, Springer-Verlag, 2008

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Journal Article: The Nonparametric Approach to Applied Welfare Analysis (2007)
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