Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217109
Authors: 
Bhattacharya, Debopam
Year of Publication: 
2018
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 9 [Year:] 2018 [Issue:] 2 [Pages:] 571-615
Abstract: 
This paper develops nonparametric methods for welfare-analysis of economic changes in the common setting of multinomial choice. The results cover (a) simultaneous price-change of multiple alternatives, (b) introduction/elimination of an option, (c) changes in choice-characteristics, and (d) choice among nonexclusive alternatives. In these cases, Marshallian consumer surplus becomes path-dependent, but Hicksian welfare remains well-defined. We demonstrate that under completely unrestricted preference-heterogeneity and income-effects, the distributions of Hicksian welfare are point-identified from structural choice-probabilities in scenarios (a), (b), and only set-identified in (c), (d). In program-evaluation contexts, our results enable the calculation of compensated-effects, that is, the program's cash-equivalent and resulting deadweight-loss. They also facilitate a theoretically justified cost-benefit comparison of interventions targeting different outcomes, for example, a tuition-subsidy and a health-product subsidy. Welfare analyses under endogeneity is briefly discussed. An application to data on choice of fishing-mode illustrates the methods.
Subjects: 
Multinomial choice
general heterogeneity
income effects
compensating variation
deadweight loss
multiple price change
elimination of alternative change in characteristics
weak separability
nonexclusive choice
compensated program-effects
JEL: 
C14
C25
D12
D61
H22
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/4.0/
Document Type: 
Article

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