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Welfare Effects, Omitted Variables, and the Extent of the Market

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  • V. Kerry Smith

Abstract

This paper offers an economic interpretation of Kling's (1989) finding that single-price change measures of consumer surplus will provide an unbiased measure for a multiple-price change, provided the prices are perfectly correlated. The explanation lies in recognizing that correlation in this case serves to define the commodity extent-of-the-market. Using this link, the paper demonstrates how the insights involved in defining general equilibrium demand functions or equivalently residual demand models can be adapted to fit the issues raised with travel cost models in accounting for the effects of substitutes.

Suggested Citation

  • V. Kerry Smith, 1993. "Welfare Effects, Omitted Variables, and the Extent of the Market," Land Economics, University of Wisconsin Press, vol. 69(2), pages 121-131.
    • Handle: RePEc:uwp:landec:v:69:y:1993:i:2:p:121-131
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    Cited by:

    1. Bujosa Bestard, Angel & Riera Font, Antoni, 2010. "Estimating the aggregate value of forest recreation in a regional context," Journal of Forest Economics, Elsevier, vol. 16(3), pages 205-216, August.
    2. Vajjhala, Shalini P. & Mische John, Anna & Evans, David A., 2008. "Determining the Extent of Market and Extent of Resource for Stated Preference Survey Design Using Mapping Methods," RFF Working Paper Series dp-08-14, Resources for the Future.
    3. von Haefen, Roger H., 2010. "Incomplete Demand Systems, Corner Solutions, and Welfare Measurement," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 39(1), pages 1-15, February.
    4. Prayaga, Prabha, 2017. "Estimating the value of beach recreation for locals in the Great Barrier Reef Marine Park, Australia," Economic Analysis and Policy, Elsevier, vol. 53(C), pages 9-18.
    5. Patrick J. Walsh & J. Walter Milon & David O. Scrogin, 2011. "The Spatial Extent of Water Quality Benefits in Urban Housing Markets," Land Economics, University of Wisconsin Press, vol. 87(4), pages 628-644.
    6. J. DeShazo & Trudy Cameron & Manrique Saenz, 2009. "The Effect of Consumers’ Real-World Choice Sets on Inferences from Stated Preference Surveys," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(3), pages 319-343, March.

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