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Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss

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  • Hausman, Jerry A
  • Newey, Whitney K

Abstract

The authors apply nonparametric regression models to estimation of demand curves of the type most often used in applied research. From the demand curve estimators they derive estimates of exact consumers surplus and deadweight loss. The authors also develop tests of the symmetry and downward sloping properties of compensated demand. They work out asymptotic normal sampling theory for kernel and series nonparametric estimators as well as for the parametric case. The paper includes an application to gasoline demand that estimates the shape of the demand curve and the average magnitude of welfare loss from a tax on gasoline. Copyright 1995 by The Econometric Society.

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  • Hausman, Jerry A & Newey, Whitney K, 1995. "Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss," Econometrica, Econometric Society, vol. 63(6), pages 1445-1476, November.
  • Handle: RePEc:ecm:emetrp:v:63:y:1995:i:6:p:1445-76
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    References listed on IDEAS

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    1. Humphrey, David B., 2004. "Replacement of cash by cards in US consumer payments," Journal of Economics and Business, Elsevier, vol. 56(3), pages 211-225.
    2. Lippi, Francesco & Secchi, Alessandro, 2006. "Technological change and the demand for currency: An analysis with household data," CEPR Discussion Papers 6023, C.E.P.R. Discussion Papers.
    3. Orazio P. Attanasio & Luigi Guiso & Tullio Jappelli, 2002. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 317-351, April.
    4. Jacob A. Frenkel & Boyan Jovanovic, 1980. "On Transactions and Precautionary Demand for Money," The Quarterly Journal of Economics, Oxford University Press, vol. 95(1), pages 25-43.
    5. Thomas F. Cooley & Gary D. Hansen, 1991. "The welfare costs of moderate inflations," Proceedings, Federal Reserve Bank of Cleveland, pages 483-518.
    6. Luca Casolaro & Leonardo Gambacorta & Luigi Guiso, 2005. "Regulation, formal and informal enforcement and the development of the household loan market. Lessons from Italy," Temi di discussione (Economic working papers) 560, Bank of Italy, Economic Research and International Relations Area.
    7. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
    8. George M. Constantinides & Scott F. Richard, 1978. "Existence of Optimal Simple Policies for Discounted-Cost Inventory and Cash Management in Continuous Time," Operations Research, INFORMS, vol. 26(4), pages 620-636, August.
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