Consumer's Welfare and Change in Stochatstic Partial- Equilibrium Price
AbstractFirst, I show that the expected consumer's surplus is equivalent to ex ante compensating variation if and only if the consumer is risk neutral, and the consumer's income elasticity of demand for the commodity is zero. Moreover, the conditions are equivalent to the von Neuman - Morgenstern utility function being quasi-linear. Second, I show that the expected consumer's surplus is an approximation for the consumer's welfare, measured by expected utility, also if the expenditure share is small. Third, I propose a formula to evaluate approximately the consumer's welfare, measured both by expected utility and by ex ante compensating variation, when the above conditions are not met.
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Bibliographic InfoPaper provided by Tilburg - Center for Economic Research in its series Papers with number 9572.
Length: 23 pages
Date of creation: 1995
Date of revision:
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CONSUMPTION; RISK; DEMAND;
Other versions of this item:
- Stennek., Johan, 1997. "Consumer's Welfare and Change in Stochastic Partial-Equilibrium Price," Seminar Papers 598, Stockholm University, Institute for International Economic Studies.
- Stennek, J., 1995. "Consumer's Welfare and Change in Stochastic Partial-Equilibrium Price," Papers 598, Stockholm - International Economic Studies.
- D10 - Microeconomics - - Household Behavior - - - General
- D1 - Microeconomics - - Household Behavior
- D60 - Microeconomics - - Welfare Economics - - - General
- D69 - Microeconomics - - Welfare Economics - - - Other
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