The Nonparametric Approach to Applied Welfare Analysis
Changes in total surplus and deadweight loss are traditional measures of economic welfare. We propose necessary and sufficient conditions for rationalizing consumer demand data with a quasilinear utility function. Under these conditions, consumer surplus is a valid measure of consumer welfare. For nonmarketed goods, we propose necessary and sufficient conditions on market data for efficient production , i.e., production at minimum cost. Under these conditions we derive a cost function for the nonmarketed good, where producer surplus is the area above the marginal cost curve.
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Volume (Year): 31 (2007)
Issue (Month): 1 (April)
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- Shoven,John B. & Whalley,John, 1992.
"Applying General Equilibrium,"
Cambridge University Press, number 9780521319867, October.
- Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
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- Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
- Chiappori, Pierre-Andre & Rochet, Jean-Charles, 1987. "Revealed Preferences and Differentiable Demand: Notes and Comments," Econometrica, Econometric Society, vol. 55(3), pages 687-691, May.
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