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Estimating Consumer Surplus in the Censored Linear Model

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  • Daniel Hellerstein

Abstract

The TOBIT estimator of the linear model is commonly used to control for censoring. However, when predicting either demand or consumer surplus, simply substituting the resulting coefficient estimates back into the linear functional form is incorrect. This failure stems from the non-linear impact of variations in cut-off price in an otherwise uniform population. Several techniques that recognize this potential problem are recommended. The performance of these recommended techniques is investigated with a Monte Carlo simulation.

Suggested Citation

  • Daniel Hellerstein, 1992. "Estimating Consumer Surplus in the Censored Linear Model," Land Economics, University of Wisconsin Press, vol. 68(1), pages 83-92.
    • Handle: RePEc:uwp:landec:v:68:y:1992:i:1:p:83-92
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    Cited by:

    1. Cameron, Trudy Ann & Shaw, W. Douglass & Ragland, Shannon E. & Callaway, J. Mac & Keefe, Sally, 1996. "Using Actual And Contingent Behavior Data With Differing Levels Of Time Aggregation To Model Recreation Demand," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(1), pages 1-20, July.
    2. Beatty, Timothy K.M. & Brozovic, Nicholas & Ward, Michael B., 2005. "Consumer Surplus Estimates and the Source of Regression Error," 2005 Annual meeting, July 24-27, Providence, RI 19477, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Riyadi, Dedi M. M. & Brown, William G., 1992. "Comparsions of Several Methods of Estimating Linear Demand and Consumer Surplus: Some Unexpected Experimental Results," WAEA/ WFEA Conference Archive (1929-1995) 321345, Western Agricultural Economics Association.
    4. Moore, Michael R. & Gollehon, Noel R. & Hellerstein, Daniel, 2000. "Estimating Producer'S Surplus With The Censored Regression Model: An Application To Producers Affected By Columbia River Basin Salmon Recovery," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-22, December.
    5. Ribaudo, Marc O. & Hellerstein, Daniel, 1992. "Estimating Water Quality Benefits: Theoretical and Methodological Issues," Technical Bulletins 157031, United States Department of Agriculture, Economic Research Service.
    6. Choi, Ki-Hong & Moon, Choon-Geol, 1997. "Generalized extreme value model and additively separable generator function," Journal of Econometrics, Elsevier, vol. 76(1-2), pages 129-140.

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