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Consumer's Surplus versus Compensating Variation Revisited

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  • LaFrance, Jeffrey T.
Abstract
Consumer's surplus and a second-order approximation to compensating variation are compared to the exact compensating variation for a subsystem of several commodities. An empirical application to the relative retail price distortions created by the U.S. dairy program is presented. In the application, a new specification for weakly integrable incomplete demand models is developed and estimated. The integrable demand model has sufficient flexibility that it is not rejected by the data. Both welfare approximations are found to introduce large errors in the measurement of deadweight losses.

Suggested Citation

  • LaFrance, Jeffrey T., 1991. "Consumer's Surplus versus Compensating Variation Revisited," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271258, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea91:271258
    DOI: 10.22004/ag.econ.271258
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    References listed on IDEAS

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    9. Huang, Kuo S & Haidacher, Richard C, 1983. "Estimation of a Composite Food Demand System for the United States," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(4), pages 285-291, October.
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    12. LaFrance, Jeffrey T., 1991. "When Is Expenditure "Exogenous" In Separable Demand Models?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(1), pages 1-14, July.
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    Cited by:

    1. Hayley H. Chouinard & David E. Davis & Jeffrey T. LaFrance & Jeffrey M. Perloff, 2010. "Milk Marketing Order Winners and Losers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 59-76.
    2. Zhao, Xueyan & Mullen, John D. & Griffith, Garry R., 2001. "Some Practical Issues in Economic Surplus Measurement in Multi-Market Models," 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia 126067, Australian Agricultural and Resource Economics Society.
    3. Zhao, Xueyan & Mullen, John D. & Griffith, Garry R., 2005. "Economic Surplus Measurement in Multi-Market Models," Working Papers 12910, University of New England, School of Economics.
    4. Arnade, Carlos Anthony & Gopinath, Munisamy & Pick, Daniel H., 2011. "How Much Do Consumers Benefit from New Brand Introductions? The Case of Potato Chips," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(1), pages 1-17, April.
    5. Revoredo-Giha, Cesar & Zavala-Nacul, Hasibi & Toma, L., 2021. "Assessing an Increase of Orphan Crops in the Kenyan Diet," 2021 Conference, August 17-31, 2021, Virtual 315174, International Association of Agricultural Economists.
    6. Cesar Revoredo-Giha & Hasibi Zavala-Nacul & Luiza Toma, 2022. "Assessing the Nutritional Impact of an Increase in Orphan Crops in the Kenyan Diet: The Case of Millet," Sustainability, MDPI, vol. 14(5), pages 1-14, February.
    7. Zhao, Xueyan & Mullen, John D. & Griffith, Garry R. & Griffiths, William E. & Piggott, Roley R., 2000. "An Equilibrium Displacement Model of the Australian Beef Industry," Research Reports 28007, New South Wales Department of Primary Industries Research Economists.
    8. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Fleming, Euan M. & Zhao, Xueyan, 2008. "An Equilibrium Displacement Model of the Australian Sheep and Wool Industries," Research Reports 37663, New South Wales Department of Primary Industries Research Economists.
    9. Bejranonda, Somskaow & Hitzhusen, Frederick J. & Hite, Diane, 1999. "Agricultural Sedimentation Impacts On Lakeside Property Values," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(2), pages 1-11, October.
    10. Revoredo-Giha, Cesar & Dogbe, Wisdom, 2023. "An empirical analysis of the purchases of soft fruit in Scotland," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334512, Agricultural Economics Society - AES.
    11. Wang, Lijun & Zha, Donglan & O’Mahony, Tadhg & Zhou, Dequn, 2023. "Energy efficiency lags and welfare boons: Understanding the rebound and welfare effects through China's urban households," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).

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