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Welfare calculations in discrete choice models when anticipated and experienced attributes differ: A guide with examples

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  • Train, Kenneth

Abstract

The attributes that consumers anticipate or expect when choosing among alternatives (i.e., prior to consumption) often differ from the attributes that they actually experience when consuming their chosen alternative. This paper describes, and illustrates with several examples, the calculation of consumer surplus in this situation and the loss in consumer surplus due to the imperfect foreknowledge about attributes. The procedures are useful in many settings, such as the assessment of damages for false advertising and the analysis of informational policies.

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  • Train, Kenneth, 2015. "Welfare calculations in discrete choice models when anticipated and experienced attributes differ: A guide with examples," Journal of choice modelling, Elsevier, vol. 16(C), pages 15-22.
    • Handle: RePEc:eee:eejocm:v:16:y:2015:i:c:p:15-22
    DOI: 10.1016/j.jocm.2015.09.003
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    References listed on IDEAS

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    14. Daniel McFadden, 2017. "Foundations of Welfare Economics and Product Market Applications," NBER Working Papers 23535, National Bureau of Economic Research, Inc.
    15. Siqi Liu & Bhoomija Ranjan & Benjamin Reed Shiller, 2020. "Are Coarse Ratings Fine? Applications to Crashworthiness Ratings," Working Papers 132, Brandeis University, Department of Economics and International Business School.
    16. Kevin Ducbao Tran, 2020. "Partitioned Pricing and Consumer Welfare," Discussion Papers of DIW Berlin 1888, DIW Berlin, German Institute for Economic Research.
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