Utility of income as a random function: Behavioral characterization and empirical evidence
The paper proposes a particular approach to model the utility of income. We develop a theoretical framework that restricts the class of admissible functional forms and distributions of the random components of the model. The theoretical approach is based on theories of probabilistic choice and ideas that are used in modern psychophysical research. From our theoretical framework, we obtain the empirical model and the corresponding likelihood function. The empirical analysis is based on a "Stated Preference" survey. The model fits the data quite well. Finally, we discuss the concept of cardinality and the implications for consumer demand relations.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gerard Debreu, 1957. "Stochastic Choice and Cardinal Utility," Cowles Foundation Discussion Papers 39, Cowles Foundation for Research in Economics, Yale University.
- Simon, Herbert A, 1986. "Rationality in Psychology and Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages S209-24, October.
- Dagsvik, John k: & Strøm, Steinar, 2003.
"A Stochastic Model for the Utility of Income,"
32/2003, Oslo University, Department of Economics.
- Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
- van Praag, Bernard M. S. & Kapteyn, Arie, 1994. "How sensible is the Leyden individual welfare function of income? A reply," European Economic Review, Elsevier, vol. 38(9), pages 1817-1825, December.
- Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September.
- Daniel McFadden, 2001.
American Economic Review,
American Economic Association, vol. 91(3), pages 351-378, June.
- Patel, Nitin R. & Subrahmanyam, Marti G., 1978. "Utility theory and participation in unfair lotteries," Journal of Economic Theory, Elsevier, vol. 19(2), pages 555-557, December.
- Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
- Van Herwaarden, Floor G. & Kapteyn, Arie, 1979. "Empirical comparison of the shape of welfare functions," Economics Letters, Elsevier, vol. 3(1), pages 71-76.
- Buyze, Jeannine, 1982. "The estimation of welfare levels of a cardinal utility function," European Economic Review, Elsevier, vol. 17(3), pages 325-332.
- Van Praag, Bernard, 1971.
"The welfare function of income in Belgium: An empirical investigation,"
European Economic Review,
Elsevier, vol. 2(3), pages 337-369.
- Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
- Seidl, Christian, 1994. "How sensible is the Leyden individual welfare function of income?," European Economic Review, Elsevier, vol. 38(8), pages 1633-1659, October.
- Kapteyn, Arie & Wansbeek, Tom, 1985. "The individual welfare function : A review," Journal of Economic Psychology, Elsevier, vol. 6(4), pages 333-363, December.
- Van Praag, B.M.S., 1989. "The Relativity of the Welfare Concept," Research Paper 69, World Institute for Development Economics Research.
- John K. Dagsvik, 2002. "Discrete Choice in Continuous Time: Implications of an Intertemporal Version of the Iia Property," Econometrica, Econometric Society, vol. 70(2), pages 817-831, March.
- van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
When requesting a correction, please mention this item's handle: RePEc:eee:matsoc:v:51:y:2006:i:1:p:23-57. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.