Price Uncertainty and Consumer Welfare in an Intertemporal Setting

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Price Uncertainty and Consumer Welfare in an Intertemporal Setting

Please use this identifier to cite or link to this item: http://hdl.handle.net/10355/2746

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Title: Price Uncertainty and Consumer Welfare in an Intertemporal Setting
Author: Ni, Shawn, 1962-; Raymon, Neil
Keywords: price uncertainty
consumer welfare
risk aversion
intertemporal substitution
Date: 2000
Publisher: Department of Economics
Citation: Department of Economics, 2000
Series/Report no.: Working papers (Department of Economics);WP 00-10
Abstract: In this paper we examine how increases in intertemporal price uncertainty affect the welfare of a consumer. In the preference structure of the consumer the coefficient of relative risk aversion and the elasticity of intertemporal substitution (EIS) are parametrically independent. We find that under empirically plausible circumstances, for each given degree of risk aversion an increase in price uncertainty reduces consumer welfare if the EIS is lower than a corresponding threshold value. Overall our results suggest that for parameter estimates found in much of the empirical literature, increases in intertemporal price uncertainty are likely to reduce consumer welfare.
URI: http://hdl.handle.net/10355/2746

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  • Economics publications (MU) [120]
    The items in this collection are the scholarly output of the faculty, staff, and students of the Department of Economics.

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