Daniel L. McFadden

Foundations of Welfare Economics


Abstract

A common problem in applied economics is to determine the impact on consumers of policy changes that alter prices and attributes of marketed products. Examples are prospective regulation of product safety and reliability, and retrospective compensation for harm from defective products or misrepresentation of product features. This presentation updates the traditional Marshall-Hicks tools for welfare analysis to deal with issues that arise in these applications: defects in consumer decision-making, partial observability of individual consumer decision utility, compensating transfers that are not fulfilled, and experienced utility versus decision utility.


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