Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130041
Authors: 
Griffith, Rachel
Nesheim, Lars
O'Connell, Martin
Year of Publication: 
2015
Series/Report no.: 
cemmap working paper, Centre for Microdata Methods and Practice CWP23/15
Abstract: 
Random utility models are widely used to study consumer choice. The vast majority of applications make strong assumptions about the marginal utility of income, which restricts income effects, demand curvature and pass-through. We show that flexibly modeling income effects can be important, particularly if one is interested in the distributional effects of a policy change, even in a market in which, a priori, the expectation is that income effects will play a limited role. We allow for much more flexible forms of income effects than is common and we illustrate the implications by simulating the introduction of an excise tax.
Subjects: 
income effects
compensating variation
demand estimation
oligopoly
pass-through
JEL: 
L13
H20
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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