Nonparametric welfare and demand analysis with unobserved individual heterogeneity

S. Cosaert, T. Demuynck

Research output: Working paperProfessional

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Abstract

In this paper, we combine elementary revealed preference principles and nonparametric estimation techniques in order to obtain nonparametric bounds on the distribution of the money metric utility over a population of heterogeneous households. The main benefit of our approach is that it is independent of any functional specification on the household utility functions, which means that our results are robust against parametric specification errors. We further demonstrate that our methodology can be used to establish bounds on the distribution of the demand function for counterfactual price regimes. In order to demonstrate the relevance of our approach, we illustrate our findings using a repeated cross-sectional household consumption data set.
Original languageEnglish
Place of PublicationMaastricht
PublisherMaastricht University, Graduate School of Business and Economics
DOIs
Publication statusPublished - 1 Jan 2014

Publication series

SeriesGSBE Research Memoranda
Number010

Cite this

Cosaert, S., & Demuynck, T. (2014). Nonparametric welfare and demand analysis with unobserved individual heterogeneity. Maastricht University, Graduate School of Business and Economics. GSBE Research Memoranda, No. 010 https://doi.org/10.26481/umagsb.2014010