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Welfare measurement with income-dependent discrete choice

Author

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  • Delle Site, P.
  • Kilani, K.

Abstract

The expectation of the random compensating variation is the welfare change measure that is used in discrete choice models. The expectation of the equivalent variation is equally founded theoretically. When choices are income independent and income enters utilities linearly, the two measures are identical. The case of income-dependent choices remains an area for exploration. The paper provides the equivalent variation counterparts of the formulas that are available for the expectation of the compensating variation.

Suggested Citation

  • Delle Site, P. & Kilani, K., 2024. "Welfare measurement with income-dependent discrete choice," Economics Letters, Elsevier, vol. 245(C).
    • Handle: RePEc:eee:ecolet:v:245:y:2024:i:c:s0165176524005354
    DOI: 10.1016/j.econlet.2024.112051
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    More about this item

    Keywords

    Compensating variation; Discrete choice; Equivalent variation; Random utility; Welfare;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General

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