Nonlinear Income Effects in Random Utility Models

Joseph Herriges and Catherine Kling

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Random utility models (RUMs) are used in the literature to model consumer choices from among a discrete set of alternatives, and they typically impose a constant marginal utility of income on individual preferences. This assumption is driven partially by the difficulty of constructing welfare estimates in models with nonlinear income effects. Recently, McFadden (1995) developed an algorithm for computing these welfare impacts using a Monte Carlo Markov chain simulator for generalized extreme-value variates. This paper investigates the empirical consequences of nonlinear RUMs in the case of sportfishing modal choice, while refining and contrasting the available methods for welfare estimation.

Date: 1999-02-01
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Journal Article: Nonlinear Income Effects in Random Utility Models (1999)
Working Paper: Nonlinear Income Effects in Random Utility Models (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:199902010800001017

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