Is utility additive? The case of alcohol
The hypothesis of additive utility (or preference independence) is often applied to the demand for broad aggregates. Recent testing provides some evidence favourable to the hypothesis, thus overturning the older results based on the standard asymptotic tests which are seriously biased against the null in small samples. Using data for seven countries and a variety of tests, this paper shows that preference independence also cannot be rejected for more narrowly defined commodities - beer, wine and spirits. The implications of the results for efficient taxation of alcoholic beverages are also explored.
Volume (Year): 29 (1997)
Issue (Month): 9 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
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.:
- E.A. Selvanathan, 1991. "A Cross-Country Alcohol Consumption Comparison: An application of the Rotterdam demand system," Economics Discussion / Working Papers 91-04, The University of Western Australia, Department of Economics.
- Clements, Kenneth W & Selvanathan, Saroja, 1994.
"Understanding Consumption Patterns,"
Springer, vol. 19(1), pages 69-110.
- Barnett, William A, 1979. "Theoretical Foundations for the Rotterdam Model," Review of Economic Studies, Wiley Blackwell, vol. 46(1), pages 109-30, January.
- Taylor, Timothy G. & Shonkwiler, J. S. & Theil, Henri, 1986. "Monte Carlo and bootstrap testing of demand homogeneity," Economics Letters, Elsevier, vol. 20(1), pages 55-57.
- Selvanathan, E A, 1991. "Further Results on Aggregation of Differential Demand Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 799-805, July.
- Selvanathan, Saroja, 1987. "A Monte Carlo test of preference independence," Economics Letters, Elsevier, vol. 25(3), pages 259-261.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:29:y:1997:i:9:p:1163-1167. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.