Unobserved Preference Heterogeneity in Demand Using Generalized Random Coefficients

Arthur Lewbel and Krishna Pendakur

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: We prove a new identification theorem showing nonparametric identification of the joint distribution of random coefficients in general nonlinear and additive models. This differs from existing random coefficients models by not imposing a linear index structure for the regressors. We then model unobserved preference heterogeneity in consumer demand as utility functions with random Barten scales. These Barten scales appear as random coefficients in nonlinear demand equations. Using Canadian data, we compare estimated energy demand functions with and without random Barten scales. We find that unobserved preference heterogeneity substantially affects the estimated consumer surplus costs of an energy tax.

Keywords: unobserved heterogeneity; nonseparable errors; random utility parameters; random coefficients; equivalence scales; consumer surplus; welfare calculations (search for similar items in EconPapers)
JEL-codes: C14 C21 D12 D13 (search for similar items in EconPapers)
Pages: 64
Date: 2015-11
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Unobserved Preference Heterogeneity in Demand Using Generalized Random Coefficients (2017)
Working Paper: Unobserved Preference Heterogeneity in Demand Using Generalized Random Coefficients (2015)
Working Paper: Unobserved Preference Heterogeneity in Demand Using Generalized Random Coefficients (2013)
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