Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79551
Authors: 
Hausman, Jerry
Newey, Whitney
Year of Publication: 
2013
Series/Report no.: 
cemmap working paper, Centre for Microdata Methods and Practice CWP34/13
Abstract: 
Individual heterogeneity is an important source of variation in demand. Allowing for general heterogeneity is needed for correct welfare comparisons. We consider general heterogenous demand where preferences and linear budget sets are statistically independent. We find that the dimension of heterogeneity and the individual demand functions are not identified. We also find that the exact consumer surplus of a price change, averaged across individuals, is not identified, motivating bounds analysis. We use bounds on income effects to derive relatively simple bounds on the average surplus, including for discrete/continuous choice. We also sketch an approach to bounding surplus that does not use income effect bounds. We apply the results with income effect bounds to gasoline demand. We find little sensitivity to the income effect bounds in this application.
Subjects: 
Consumer surplus
deadweight loss
identification
quantiles
JEL: 
C10
C14
C51
C54
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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