Reconsidering the Economics of Demand Analysis with Kinked Budget Constraints
This paper has two objectives. First, we identify a problem with the ability of the discrete-continuous choice framework and conditional demand functions to fully describe consumer preferences in the presence of kinked budget constraints. Second, we propose and illustrate an alternative, preference-based method for estimating consumer responses to price changes under these conditions. This framework recognizes that commitments to commodities such as pools or outdoor landscaping influence how water consumption responds to price changes as part of the long-run consumption adjustments. With microdata on household choices, this approach could be used to design increasing block rate structures that recognize the differences in water consumption responses with these commitments.
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.
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.:
- Arrufat, Jose Luis & Zabalza, Antonio, 1986. "Female Labor Supply with Taxation, Random Preferences, and Optimization Errors," Econometrica, Econometric Society, vol. 54(1), pages 47-63, January.
- Ellen Hanak & Ada Chen, 2005.
"Wet Growth: Effects of Water Policies on Land Use in the American West,"
PPIC Working Papers
2005.10, Public Policy Institute of California.
- Ellen Hanak & Ada Chen, 2007. "Wet Growth: Effects Of Water Policies On Land Use In The American West," Journal of Regional Science, Wiley Blackwell, vol. 47(1), pages 85-108.
- Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007.
"Water demand under alternative price structures,"
Journal of Environmental Economics and Management,
Elsevier, vol. 54(2), pages 181-198, September.
- von Haefen R.H. & Phaneuf D.J. & Parsons G.R., 2004. "Estimation and Welfare Analysis With Large Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 194-205, April.
- Bockstael, Nancy E & McConnell, Kenneth E, 1983. "Welfare Measurement in the Household Production Framework," American Economic Review, American Economic Association, vol. 73(4), pages 806-14, September.
- Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007.
"A Unified Framework for Measuring Preferences for Schools and Neighborhoods,"
NBER Working Papers
13236, National Bureau of Economic Research, Inc.
- Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, 08.
- Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Working Papers 07-27, Center for Economic Studies, U.S. Census Bureau.
- Sudip Chattopadhyay, 1999. "Estimating the Demand for Air Quality: New Evidence Based on the Chicago Housing Market," Land Economics, University of Wisconsin Press, vol. 75(1), pages 22-38.
- J. Hausman, 1979.
"The Effect of Wages, Taxes and Fixed Costs on Women's Labor Force Participation,"
238, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jerry A. Hausman, 1980. "The effect of wages, taxes, and fixed costs on women's labor force participation," NBER Chapters, in: Econometric Studies in Public Finance, pages 161-194 National Bureau of Economic Research, Inc.
- Hausman, Jerry A., 1980. "The effect of wages, taxes, and fixed costs on women's labor force participation," Journal of Public Economics, Elsevier, vol. 14(2), pages 161-194, October.
- Brown, James N & Rosen, Harvey S, 1982.
"On the Estimation of Structural Hedonic Price Models,"
Econometric Society, vol. 50(3), pages 765-68, May.
- James N. Brown & Harvey S. Rosen, 1982. "On the Estimation of Structural Hedonic Price Models," NBER Technical Working Papers 0018, National Bureau of Economic Research, Inc.
- Edlefsen, Lee E, 1981. "The Comparative Statics of Hedonic Price Functions and Other Nonlinear Constraints," Econometrica, Econometric Society, vol. 49(6), pages 1501-20, November.
- Zabalza, Antoni, 1983. "The CES Utility Function, Non-Linear Budget Constraints and Labour Supply: Results on Female Participation and Hours," Economic Journal, Royal Economic Society, vol. 93(37), pages 312-30, June.
- Smith, V. Kerry, 1974. "Intertemporal production externalities, technical change, and public expenditure analysis," Journal of Environmental Economics and Management, Elsevier, vol. 1(2), pages 121-131, August.
- Epstein, Larry G, 1981. "Generalized Duality and Integrability," Econometrica, Econometric Society, vol. 49(3), pages 655-78, May.
- Mendelsohn, Robert, 1985. "Identifying Structural Equations with Single Market Data," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 525-29, August.
- Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819 Elsevier.
- Smith, V. Kerry & Pattanayak, Subhrendu K. & Van Houtven, George L., 2003. "VSL reconsidered: what do labor supply estimates reveal about risk preferences?," Economics Letters, Elsevier, vol. 80(2), pages 147-153, August.
- Hanemann, W Michael, 1984. "Discrete-Continuous Models of Consumer Demand," Econometrica, Econometric Society, vol. 52(3), pages 541-61, May.
- von Haefen, Roger H., 2002. "A Complete Characterization Of The Linear, Log-Linear, And Semi-Log Incomplete Demand System Models," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
- Erin T. Mansur & Sheila M. Olmstead, 2007.
"The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations,"
NBER Working Papers
13513, National Bureau of Economic Research, Inc.
- Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.
- Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
- Raj Chetty & Adam Szeidl, 2007. "Consumption Commitments and Risk Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 831-877.
- Bullock, David S. & Minot, Nicholas, 2006.
"On Measuring the Value of a Nonmarket Good Using Market Data,"
2006 Annual Meeting, August 12-18, 2006, Queensland, Australia
25272, International Association of Agricultural Economists.
- David S. Bullock & Nicholas Minot, 2006. "On Measuring the Value of a Nonmarket Good Using Market Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 961-973.
- Peter C. Reiss & Matthew W. White, 2006. "Evaluating Welfare with Nonlinear Prices," NBER Working Papers 12370, National Bureau of Economic Research, Inc.
- Jeffrey T. LaFrance & W. Michael Hanemann, 1989.
"The Dual Structure of Incomplete Demand Systems,"
Monash Economics Working Papers
archive-21, Monash University, Department of Economics.
- Vartia, Yrjo O, 1983. "Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Ordinary Demand Functions," Econometrica, Econometric Society, vol. 51(1), pages 79-98, January.
- Julie A. Hewitt & W. Michael Hanemann, 1995. "A Discrete/Continuous Choice Approach to Residential Water Demand under Block Rate Pricing," Land Economics, University of Wisconsin Press, vol. 71(2), pages 173-192.
When requesting a correction, please mention this item's handle: RePEc:uwp:landec:v:86:y:2010:i:1:p:173-190. 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: ()
If references are entirely missing, you can add them using this form.