Dynamic consumer demand systems under uncertainty



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This dissertation is concerned with the formulation and estimation of a system of consumer demand functions derived from an intertemporal framework where the future is uncertain and where it is costly to adjust stocks of durables to desired levels. In the theoretical analysis, a representative household is assumed to maximize the expected present value of current and future utilities subject to the restrictions imposed by its economic environment. Using U.S. time-series data, the set of stochastic first-order conditions emerging from the empirical model is estimated by a full-information forward-filtered procedure. The test results reject a strict version of the rational expectations hypothesis and the symmetry and equality restrictions implied by utility maximization. The simulation experiments indicate that short run ownprice elasticities overshoot the corresponding steady-state elasticities, and that the absolute values of the latter are larger than those obtained by studies lacking appropriate dynamic elements.



Consumers, Mathematical models