Incomplete Demand Systems, Corner Solutions, and Welfare Measurement

Roger von Haefen

Agricultural and Resource Economics Review, 2010, vol. 39, issue 01, 15

Abstract: This paper demonstrates how corner solutions raise difficulties for the specification, estimation, and use of incomplete demand systems for welfare measurement with disaggregate consumption data, as is common in the outdoor recreation literature. A simple analytical model of consumer behavior is used to elucidate the potential biases for welfare measurement arising from modeling the demand for M goods as a function of M + N prices (N > 1) and income when individuals do not consume all goods in strictly positive quantities. Results from a Monte Carlo experiment suggest that these biases can be substantial for large-scale policy shocks when prices are highly correlated.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://ageconsearch.umn.edu/record/59327/files/AR ... 6%20von%20Haefen.pdf (application/pdf)

Related works:
Journal Article: Incomplete Demand Systems, Corner Solutions, and Welfare Measurement (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:arerjl:59327

DOI: 10.22004/ag.econ.59327

Access Statistics for this article

More articles in Agricultural and Resource Economics Review from Northeastern Agricultural and Resource Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().