Chapter 7 EASI Made Easier

Abstract

Lewbel and Pendakur (2009) developed the idea of implicit Marshallian demands. Implicit Marshallian demand systems allow the incorporation of both unobserved preference heterogeneity and complex Engel curves into consumer demand analysis, circumventing the standard problems associated with combining rationality with either unobserved heterogeneity or high rank in demand (or both). They also developed the exact affine Stone index (EASI) implicit Marshallian demand system wherein much of the demand system is linearised and thus relatively easy to implement and estimate. This chapter offers a less technical introduction to implicit Marshallian demands in general and to the EASI demand system in particular. I show how to implement the EASI demand system, paying special attention to tricks that allow the investigator to further simplify the problem without sacrificing too much in terms of model flexibility. STATA code to implement the simplified models is included throughout the text and in an appendix.

Citation

Pendakur, K. (2009), "Chapter 7 EASI Made Easier", Slottje, D.J. (Ed.) Quantifying Consumer Preferences (Contributions to Economic Analysis, Vol. 288), Emerald Group Publishing Limited, Leeds, pp. 179-206. https://doi.org/10.1108/S0573-8555(2009)0000288010