Abstract
In order that maximization of consumer surplus is consistent with individual preference maximization, the assumption of no income effect is required. Since this assumption cannot be met in an exact way, it is natural to ask how large is the error in estimating welfare because of that.
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References
Willig, Robert D. 1976. Consumer’s surplus without apology. The American Economic Review 66 (4): 589–597.
Hausman, Jerry A. 1981. Exact consumer’s surplus and deadweight loss. The American Economic Review 71 (4): 662–676.
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Hayashi, T. (2017). Is the Approximation Error Large or Small? . In: General Equilibrium Foundation of Partial Equilibrium Analysis. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-56696-2_5
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DOI: https://doi.org/10.1007/978-3-319-56696-2_5
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