Very interesting, thanks for the detailed explanation! I’ll be curious to see what Daniel says, but my intuition is that y=x^0.1 is a generous assumption for the shape of the freedom of choice utility curve. I do agree that I’d expect utility losses from freedom of choice to be nonlinear, but the function you’re using would imply that 80% of freedom of choice is preserved when sugary drink consumption has been cut by 90%. Moreover, my intuition is that the welfare losses due to reduced sugary drink consumption are also partially due to not getting tasty drinks anymore (thinking for myself, I wouldn’t really mind not having sugary drinks, but I would definitely be sad in the similar case of not having sugary foods). That component of the utility losses seems like it would be closer to linear.
Very interesting, thanks for the detailed explanation! I’ll be curious to see what Daniel says, but my intuition is that y=x^0.1 is a generous assumption for the shape of the freedom of choice utility curve. I do agree that I’d expect utility losses from freedom of choice to be nonlinear, but the function you’re using would imply that 80% of freedom of choice is preserved when sugary drink consumption has been cut by 90%. Moreover, my intuition is that the welfare losses due to reduced sugary drink consumption are also partially due to not getting tasty drinks anymore (thinking for myself, I wouldn’t really mind not having sugary drinks, but I would definitely be sad in the similar case of not having sugary foods). That component of the utility losses seems like it would be closer to linear.