The Nonparametric Approach to Applied Welfare Analysis
Changes in total surplus and deadweight loss are traditional measures of economic welfare. We propose necessary and suﬀicient conditions for rationalizing consumer demand data with a quasilinear utility function. Under these conditions, consumer surplus is a valid measure of consumer welfare. For nonmarketed goods, we propose necessary and suﬀicient conditions on market data for eﬀicient production , i.e., production at minimum cost. Under these conditions we derive a cost function for the nonmarketed good, where producer surplus is the area above the marginal cost curve.
Brown, Donald J. and Calsamiglia, Caterina, "The Nonparametric Approach to Applied Welfare Analysis" (2005). Cowles Foundation Discussion Papers. 1789.