The last expression is known as the "expenditure function" corresponding to her utility function. It is the key to the compensating variation calculation.
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wilcoxen.maxwell.insightworks.com/pages/307.html
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Compensating variation and equivalent variation are two different answers to the question: How much of a change in income is necessary to offset a change in price so that a consumer's utility remains at a given level?
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wps.aw.com/aw_perloff_microecon_4/44/11320/2897981.cw/c...
wps.aw.com/aw_perloff_microecon_4/44/11320/2897981.cw/content/index.html
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Definitions and Word Differences question: Explain what is meant by compensating variation and equivalent variation? There are three central measures of welfare in economics: -Consumer Surplus (using a ... -Compensating Variation (also using Hicksian demand function)
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wiki.answers.com/Q/Explain_what_is_meant_by_compensatin...
wiki.answers.com/Q/Explain_what_is_meant_by_compensating_variation_and_equivalent_variation
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Downloadable (with restrictions)! Hicksian welfare theory is static in nature, but many decisions are made in a dynamic environment. We present a dynamic model of an agent's decision to purchase or sell a good under the realistic conditions of uncertainty, irreversibility, and learning over time. ... Catherine Louise Kling...
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ideas.repec.org/a/oup/ecinqu/v42y2004i3p503-517.html
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Other versions of this item: ... References listed on IDEAS; Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: ... Steven Berry & James Levinsohn & Ariel Pakes,
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ideas.repec.org/p/ema/worpap/2003-02.html
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Consequently, the standard Hicksian equivalence between WTP and compensating and equivalent variation no longer holds. This finding has important practical implications because it implies that observed WTP values are not always appropriate for welfare analysis.
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www.card.iastate.edu/publications/synopsis.aspx?id=300
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Working Paper: Willingness-to-Pay, Compensating Variation, and the Cost of Commitment (2000); Journal Article: Willingness to Pay, Compensating Variation, and the Cost of Commitment (2004) ; This item may be available elsewhere in EconPapers: Search for items with the same title.
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econpapers.repec.org/paper/iascpaper/00-wp251.htm
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For a large class of additive random utility discrete choice models with income effects, we compute the probability distribution of the compensating variation. We show that the cumulative distribution function only depends on the choice probabilities.
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papers.ssrn.com/sol3/papers.cfm?abstract_id=981370
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An exact formula for the expected compensating variation is derived for logit and nested-logit models with income effects. Intuition, examples, and an application are provided. The appendix contains a formal proof.
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papers.ssrn.com/sol3/papers.cfm?abstract_id=562802
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