The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model

William Barnett and Ikuyasu Usui
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Ikuyasu Usui: Department of Economics, The University of Kansas

No 200609, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: We conduct a Monte Carlo study of the global regularity properties of the Normalized Quadratic model. We particularly investigate monotonicity violations, as well as the performance of methods of locally and globally imposing curvature. We find that monotonicity violations are especially likely to occur, when elasticities of substitution are greater than unity. We also find that imposing curvature locally produces difficulty in the estimation, smaller regular regions, and the poor elasticity estimates in many cases considered in the paper. Imposition of curvature alone does not assure regularity, and imposing local curvature alone can have very adverse consequences.

JEL-codes: C14 C22 E32 E37 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2006-10
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Citations: View citations in EconPapers (3)

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Related works:
Chapter: The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model (2007)
Working Paper: The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model (2006)
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