The random utility model (RUM, McFadden and Richter (1990)) has been the standard tool to describe the behavior of a population of decision makers. RUM assumes that decision makers behave as if they maximize a rational preference over a choice set. This assumption may fail when consideration of...

VAT rates have changed multiple times and to a relatively great extent in Hungary during the past years. We use the resulting price changes in estimating the price- and income-elasticity of households’ expenditures. As a novelty, we introduce an interaction term in estimating the demand system...