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Best nonparametric bounds on demand responses

Blundell, R.; Browning, M.; Crawford, I.; (2005) Best nonparametric bounds on demand responses. (cemmap Working Papers CWP12/). Institute for Fiscal Studies: London, UK. Green open access

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Abstract

This paper uses revealed preference inequalities to provide the tightest possible (best) nonparametric bounds on consumer responses to price changes using consumer level data over a finite set of relative price changes. These responses are allowed to vary nonpara- metrically 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 as E-bounds. Deviations from revealed preference restrictions are measured by preference perturbations which are shown to usefully characterise taste change and to provide a stochastic environment within which violations of revealed preference inequalities can be assessed.

Type: Working / discussion paper
Title: Best nonparametric bounds on demand responses
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.cemmap.ac.uk/publications.php?publicati...
Language: English
Additional information: Please see http://eprints.ucl.ac.uk/15903/ for another working paper version and http://eprints.ucl.ac.uk/15895/ for a version published in Econometrica
Keywords: JEL classification: D12, C14, C43. Demand responses, relative prices, revealed preference, semiparametric regression, changing tastes
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14686
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