THE IMPORTANCE OF FUNCTIONAL FORM IN THE ESTIMATION OF WELFARE

Researchers have recognized the central role that the choice of functional form has on estimated of consumer surplus. The purpose of this paper is to quantify the magnitude of errors which might arise from the use of incorrect functional forms. It describes a simulation experiment where estimated consumer surplus, based on simulated data sets, is compared with consumer surplus computed directly from the simulate data. The errors resulting from the use of mismatching functional forms range from approximately 4% to 107%.


Issue Date:
1989-07
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/32452
Published in:
Western Journal of Agricultural Economics, Volume 14, Number 1
Page range:
168-174
Total Pages:
7




 Record created 2017-04-01, last modified 2017-08-25

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