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

13 Pages Posted: 9 Oct 2012

See all articles by Richard W. Blundell

Richard W. Blundell

UCL; IFS; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Martin Browning

University of Oxford

Ian Crawford

University of Oxford

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Frederic Vermeulen

Tilburg University - CentER; IZA Institute of Labor Economics

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Date Written: July 1, 2012

Abstract

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.

Suggested Citation

Blundell, Richard W. and Browning, Martin and Crawford, Ian and De Rock, Bram and Vermeulen, Frederic and Cherchye, Laurens, Sharp for SARP: Nonparametric Bounds on the Behavioural and Welfare Effects of Price Changes (July 1, 2012). Available at SSRN: https://ssrn.com/abstract=2158658 or http://dx.doi.org/10.2139/ssrn.2158658

Richard W. Blundell

UCL ( email )

Department of Economics
Gower Street
London, WC1E 6BT
United Kingdom
+44 20 7504 5863 (Phone)
+44 20 7916 2773 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctp39a/

IFS

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HOME PAGE: http://www.ifs.org.uk

IZA Institute of Labor Economics

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Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Martin Browning

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Ian Crawford

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Av. F. D. Roosevelt, 50
CP 114
Brussels, B-1050
Belgium

Frederic Vermeulen

Tilburg University - CentER ( email )

P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 3196 (Phone)

HOME PAGE: http://center.uvt.nl/staff/vermeulen/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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