Consumer's Surplus as an Exact Approximation When Prices Are Appropriately Deflated

S-Tier
Journal: Quarterly Journal of Economics
Year: 1988
Volume: 103
Issue: 3
Pages: 543-553

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

A canonical price-normalized form is proposed as a generalization of the ordinary consumer's surplus expression commonly used to evaluate changes in economic welfare. This familiar-looking formula, it is proved, can be rigorously interpreted as representing the first- and second-order terms of a Taylor-series expansion for the equivalent-variation or willingness-to-pay function of a single consumer. In principle, the lowly consumer's surplus triangle-and-rectangle methodology can be rigorously defended as an exact approximation to a theoretically meaningful measure as long as prices are appropriately deflated. The appropriate price deflator is derived, and some implications are discussed.

Technical Details

RePEc Handle
repec:oup:qjecon:v:103:y:1988:i:3:p:543-553.
Journal Field
General
Author Count
1
Added to Database
2026-01-29