Robustness Measures for Welfare Analysis

Zi Yang Kang and Shoshana Vasserman

No 29656, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Economists routinely make functional form assumptions on demand curves to derive welfare conclusions. How sensitive are these conclusions to such assumptions? In this paper, we develop robustness measures that quantify the extent to which the true demand curve must deviate from common functional form assumptions in order to overturn a welfare conclusion. We parametrize this variability in terms of the gradient and curvature of the demand curve. By leveraging tools from information design, we show that our measures are easy to compute. Our measures are also flexible and easy to use, as we illustrate through several empirical applications.

JEL-codes: C14 C51 D04 D61 F14 H2 Q41 (search for similar items in EconPapers)
Date: 2022-01
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