Measurement of Consumption efficiency in Price-Quantity Space: A Distance Function Approach
In standard consumer demand analysis, it is implicitly assumed that consumers behave optimally and, thus, efficiently. However, optimality is a restrictive assumption to make for consumers' actual behaviour. This study moves away from this restrictive assumption and develops a theoretical model for the analysis of consumer's inefficiency in price-quantity space. The consumption efficiency measures which are developed allow consumer's efficiency to be studied not only in terms of budget that is wasted (i.e., as in the past attempts to study consumption efficiency in price-quantity space), but also in terms of quantities that are wasted. As regards to the empirical measurement of consumer's efficiency, an approach is proposed under which estimation of a distance function representing consumer's preferences is carried out via treatment of the unobserved utility level as a random error term.
|Date of creation:||01 Jul 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Gallos - Rethymno 74100|
Phone: +30 831 77405
Fax: +30 831 77406
Web page: http://economics.soc.uoc.gr/
More information through EDIRC
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.:
- Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
- Giannis Karagiannis & Peter Midmore & Vangelis Tzouvelekas, . "Parametric Decomposition Of Output Growth," Working Papers 0204, University of Crete, Department of Economics.
- Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
- Polachek, Solomon W & Yoon, Bong Joon, 1987. "A Two-tiered Earnings Frontier Estimation of Employer and Employee Information in the Labor Market," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 296-302, May.
- Färe, Rolf & Grosskopf, Shawna & Hayes, Kathy J. & Margaritis, Dimitris, 2008. "Estimating demand with distance functions: Parameterization in the primal and dual," Journal of Econometrics, Elsevier, vol. 147(2), pages 266-274, December.
When requesting a correction, please mention this item's handle: RePEc:crt:wpaper:0912. 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: (Kostis Pigounakis)
If references are entirely missing, you can add them using this form.