Abstract
This paper demonstrates how corner solutions raise difficulties for the specification, estimation, and use of incomplete demand systems for welfare measurement with disaggregate consumption data, as is common in the outdoor recreation literature. A simple analytical model of consumer behavior is used to elucidate the potential biases for welfare measurement arising from modeling the demand for M goods as a function of M + N prices (N > 1) and income when individuals do not consume all goods in strictly positive quantities. Results from a Monte Carlo experiment suggest that these biases can be substantial for large-scale policy shocks when prices are highly correlated.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
