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Office of Survey Methods Research
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Published Year: 2002
Survey/Program(s): Office of Prices and Living Conditions
Catalog: Economic Working Paper
WP Number: WP-353
Publication Status / Disposition: Available from the Office of Prices and Living Conditions (February 2002).
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Modeling Consumer Demand for a Large Set of Quality Differentiated Goods: Estimation and Welfare Results from a Systems Approach
Abstract
We develop an approach for estimating individual level preferences for a large set of quality differentiated goods and for constructing Hicksian welfare measure for price and quality changes within the demand system framework. Our approach uses a simulated maximum likelihood estimation procedure for recovering estimates of the structural parameters and an adaptive Metropolis-Hastings algorithm for constructing Hicksian consumer surplus estimates. We illustrate our approach with a recreation data set consisting of day trips to 62 Mid-Atlantic beaches.