IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Utility of income as a random function: Behavioral characterization and empirical evidence

  • Dagsvik, John K.
  • Strom, Steinar
  • Jia, Zhiyang

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.

File URL: http://www.sciencedirect.com/science/article/B6V88-4H80SSX-1/2/aa4c8b424c8483aa1fa1bed41bc7ef1a
Download Restriction: Full text for ScienceDirect subscribers only

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.

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 51 (2006)
Issue (Month): 1 (January)
Pages: 23-57

as
in new window

Handle: RePEc:eee:matsoc:v:51:y:2006:i:1:p:23-57
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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.:

as in new window
  1. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
  2. Seidl, Christian, 1994. "How sensible is the Leyden individual welfare function of income?," European Economic Review, Elsevier, vol. 38(8), pages 1633-1659, October.
  3. 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.
  4. Gerard Debreu, 1957. "Stochastic Choice and Cardinal Utility," Cowles Foundation Discussion Papers 39, Cowles Foundation for Research in Economics, Yale University.
  5. McFadden, Daniel L., 2000. "Economic Choices," Nobel Prize in Economics documents 2000-6, Nobel Prize Committee.
  6. Van Herwaarden, Floor G. & Kapteyn, Arie, 1979. "Empirical comparison of the shape of welfare functions," Economics Letters, Elsevier, vol. 3(1), pages 71-76.
  7. Kapteyn, Arie & Wansbeek, Tom, 1985. "The individual welfare function : A review," Journal of Economic Psychology, Elsevier, vol. 6(4), pages 333-363, December.
  8. Van Praag, B.M.S., 1989. "The Relativity of the Welfare Concept," Research Paper 69, World Institute for Development Economics Research.
  9. 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.
  10. John K. Dagsvik & Steinar Strøm & Zhiyang Jia, 2003. "A Stochastic Model for the Utility of Income," Discussion Papers 358, Research Department of Statistics Norway.
  11. 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.
  12. Buyze, Jeannine, 1982. "The estimation of welfare levels of a cardinal utility function," European Economic Review, Elsevier, vol. 17(3), pages 325-332.
  13. repec:ner:tilbur:urn:nbn:nl:ui:12-364298 is not listed on IDEAS
  14. Simon, Herbert A, 1986. "Rationality in Psychology and Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages S209-24, October.
  15. repec:ner:tilbur:urn:nbn:nl:ui:12-364387 is not listed on IDEAS
  16. repec:ner:tilbur:urn:nbn:nl:ui:12-364330 is not listed on IDEAS
  17. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  18. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
  19. 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.
  20. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.