On the Estimation of Demand Systems Through Consumption Efficiency
AbstractWe consider a Bayesian implementation of a new approach to estimating Demand Systems. This approach, suggested by Varian (1990), is based on a generalization of Afriat's (1967) efficiency index. The model we propose leads to a very tractable posterior and predictive analysis, yet allows for interesting economic interpretations. We conduct a sensitivity analysis with respect to the prior in an application to annual aggregate U.S. consumption data, and conclude that the sample is quite informative. Average efficiency and expected budget shares are examined in some detail.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 9503001.
Date of creation: 21 Mar 1995
Date of revision: 22 Feb 1996
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Bayesian Methods; Budget Shares; Money-Metric Utility; Monte Carlo;
Other versions of this item:
- Ley, Eduardo & Steel, Mark F J, 1996. "On the Estimation of Demand Systems through Consumption Efficiency," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 539-43, August.
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
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- Koop, Gary & Osiewalski, Jacek & Steel, Mark F J, 1994.
"Bayesian Efficiency Analysis with a Flexible Form: The AIM Cost Function,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 12(3), pages 339-46, July.
- Koop, G. & Osiewalski, J. & Steel, M.F.J., 1994. "Bayesian efficiency analysis with a flexible form: The aim cost function," Discussion Paper 1994-13, Tilburg University, Center for Economic Research.
- Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
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- KOOP, Gary & STEEL, Mark F. & OSIEWALSKI, Jacek, 1994. "Posterior Analysis of Stochastic Frontier Models using Gibbs Sampling," CORE Discussion Papers 1994061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Oh, Inha & Lee, Jeong-Dong & Hwang, Seogwon & Heshmati, Almas, 2006.
"Analysis of Product Efficiency in the Korean Automobile Market from a Consumer’s Perspective,"
Ratio Working Papers
95, The Ratio Institute.
- Inha Oh & Jeong-Dong Lee & Seogwon Hwang & Almas Heshmati, 2010. "Analysis of product efficiency in the Korean automobile market from a consumer’s perspective," Empirical Economics, Springer, vol. 38(1), pages 119-137, February.
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