Multiple discrete continuous choice modeling through additively and non-additively separable functional forms.

Abstract

This paper compares welfare measures for Multiple Discrete-Continuous (MDC) choice models with Additively Separable Utility (ASU) and Non-Additively Separable Utility (NASU) functions. The uncommonly used NASU approach offers flexibility for integrating complementarity and substitution patterns among alternatives. Nevertheless, welfare measures calculation is more complicated and it has rarely discussed in the literature. In contract, ASU models allow us to calculate welfare measure more easily. In this article, we use the generalized ASU and NASU functions and the minimization of the expenditure function to estimate welfare measures. Our empirical analysis uses data from the Canadian Nature Survey which includes information regarding the number of days dedicated to different recreational activities. Our results show statistically significant differences in welfare measures for changes in prices. Welfare measures from NASU function are lower than those from a ASU function.