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Welfare Analysis with Complementarities: When Direct and Total Responses Are Sufficient

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  • David Argente

Abstract

Complementarities can have important welfare consequences, but quantifying these effects would seem to require identifying and valuing the underlying mechanisms separately. This paper shows that this need not be the case. I provide necessary and sufficient conditions under which baseline subsidized activity and the direct and total responses to a subsidy determine aggregate willingness to pay. A sufficient condition for valuing the equilibrium adjustment is that it has the same effect on utility as an additional subsidy common to all agents and relevant actions. The formula is easy to apply to existing estimates and guides the design of new experiments.

Suggested Citation

  • David Argente, 2026. "Welfare Analysis with Complementarities: When Direct and Total Responses Are Sufficient," NBER Working Papers 35843, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35843
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    More about this item

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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