Compensated Variation in Random Utility Models
In this paper we introduce the notion of random expenditure function and derive the distribution of the expenditure function and corresponding compensated choice probabilities in the general case when the (random) utilities are nonlinear in income. We also derive formulae for expenditure and choice under price (policy) changes conditional on the initial utility level. This is of particular interest for welfare measurement because it enables the researcher to analyze the distribution of Compensating variation.
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- Herriges, Joseph A. & Kling, Catherine L., 1999.
"Nonlinear Income Effects in Random Utility Models,"
Staff General Research Papers Archive
1494, Iowa State University, Department of Economics.
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- P O Lindberg & E A Eriksson & L-G Mattsson, 1995. "Invariance of achieved utility in random utility models," Environment and Planning A, Pion Ltd, London, vol. 27(1), pages 121-142, January.
- Daniel McFadden, 1996. "Computing Willingness-to-Pay in Random Utility Models," Working Papers _011, University of California at Berkeley, Econometrics Laboratory Software Archive.
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