Sharp for SARP: Nonparametric Bounds on the Behavioural and Welfare Effects of Price Changes | Zendy

Richard Blundell | Zendy; Martin Browning | Zendy; Laurens Cherchye | Zendy; Ian Crawford | Zendy; Bram De Rock | Zendy; Frédéric Vermeulen | Zendy

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Sharp for SARP: Nonparametric Bounds on the Behavioural and Welfare Effects of Price Changes

Author(s) -

Richard Blundell,

Martin Browning,

Laurens Cherchye,

Ian Crawford,

Bram De Rock,

Frédéric Vermeulen

Publication year - 2012

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.2136861

Subject(s) - nonparametric statistics , welfare , economics , econometrics , mathematics , mathematical economics , market economy

Sharp nonparametric bounds are derived for Hicksian compensating and equivalent variations. These 'i-bounds' generalize earlier results of Blundell, Browning and Crawford (2008). We show that their e-bounds are sharp under the Weak Axiom of Revealed Preference (WARP). They do not require transitivity. The new i-bounds are sharp under the Strong Axiom of Revealed Preference (SARP). By requiring transitivity they can be used to bound welfare measures. The new bounds on welfare measures are shown to be operationalized through algorithms that are easy to implement.

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