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The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model

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Author Info
Barnett, William A.
Usui, Ikuyasu

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Abstract

We conduct a Monte Carlo study of the global regularity properties of the Normalized Quadratic model. We particularly investigate monotonicity violations, as well as the performance of methods of locally and globally imposing curvature. We find that monotonicity violations are especially likely to occur, when elasticities of substitution are greater than unity. We also find that imposing curvature locally produces difficulty in the estimation, smaller regular regions, and the poor elasticity estimates in many cases considered in the paper. Imposition of curvature alone does not assure regularity, and imposing local curvature alone can have very adverse consequences.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 410.

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Date of creation: 02 Oct 2006
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Handle: RePEc:pra:mprapa:410

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Keywords: Monte Carlo flexible functional form production normalized quadratic regularity curvature monotonicity

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General

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