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Best Nonparametric Bounds on Demand Responses

Blundell, R; Browning, M; Crawford, I; (2008) Best Nonparametric Bounds on Demand Responses. ECONOMETRICA , 76 (6) 1227 - 1262. 10.3982/ECTA6069.

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Abstract

This paper uses revealed preference inequalities to provide the tightest possible (best) nonparametric bounds on predicted consumer responses to price changes using consumer-level data over a finite set of relative price changes. These responses are allowed to vary nonparametrically across the income distribution. This is achieved by combining the theory of revealed preference with the semiparametric estimation of consumer expansion paths (Engel curves). We label these expansion path based bounds on demand responses as E-bounds. Deviations from revealed preference restrictions are measured by preference perturbations which are shown to usefully characterize taste change and to provide a stochastic environment within which violations of revealed preference inequalities can be assessed.

Type: Article
Title: Best Nonparametric Bounds on Demand Responses
DOI: 10.3982/ECTA6069
Keywords: Demand responses, bounds, revealed preference, partial identification, set identification, inequality restrictions, relative prices, semiparametric regression, changing tastes, CONSUMER DEMAND, ENGEL CURVES, REVEALED PREFERENCE, MODELS, REGRESSION, SYSTEMS, ERRORS, TESTS
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/94439
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