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The LeChatelier Principle

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  • Milgrom, Paul
  • Roberts, John

Abstract

The LeChatelier principle, in the form introduced into economics by Paul A. Samuelson, asserts that, at a point of long-run equilibrium, the derivative of long-run compensated demand with respect to own price is larger in magnitude than the derivative of short-run compensated demand. The authors introduce an extended LeChatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory. This extension also clarifies the intuitive basis of the principle. Copyright 1996 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 86 (1996)
Issue (Month): 1 (March)
Pages: 173-79

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Handle: RePEc:aea:aecrev:v:86:y:1996:i:1:p:173-79

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  1. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
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Cited by:
  1. Peter Arendorf Bache & Anders Laugesen, 2013. "An Industry-Equilibrium Analysis of the LeChatelier Principle," Economics Working Papers 2013-16, School of Economics and Management, University of Aarhus.
  2. Elena Antoniadou, 2007. "Comparative Statics for the Consumer Problem," Economic Theory, Springer, vol. 31(1), pages 189-203, April.
  3. Hennessy, David A., 2003. "Slaughterhouse Rules: Animal Uniformity and Regulating for Food Safety in Meat Packing," Staff General Research Papers 10839, Iowa State University, Department of Economics.
  4. Hennessy, David A. & Saak, Alexander, 2002. "State-Contingent Demand for Herbicide-Tolerance Seed Trait," Staff General Research Papers 10123, Iowa State University, Department of Economics.
  5. Nti, Kofi O. & Dompere, Kofi K., 1997. "Technological progress and optimal factor demand," International Journal of Production Economics, Elsevier, vol. 49(2), pages 117-130, April.
  6. Peter Arendorf Bache & Anders Laugesen, 2013. "Monotone Comparative Statics for the Industry Composition," Economics Working Papers 2013-10, School of Economics and Management, University of Aarhus.
  7. Lapan, Harvey E. & Hennessy, David A., 2007. "Unit Vs. Ad Valorem Taxes in Multi-Product Cournot Oligopoly," Staff General Research Papers 12780, Iowa State University, Department of Economics.
  8. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, 09.
  9. Julian Jamison, 2006. "The Le Chatelier Principle in lattices," Economics Bulletin, AccessEcon, vol. 3(2), pages 1-9.
  10. Nocetti, Diego C., 2013. "The LeChatelier principle for changes in risk," Journal of Mathematical Economics, Elsevier, vol. 49(6), pages 460-466.
  11. Briec, Walter & Kerstens, Kristiaan & Prior, Diego & Van de Woestyne, Ignace, 2010. "Tangency capacity notions based upon the profit and cost functions: A non-parametric approach and a general comparison," Economic Modelling, Elsevier, vol. 27(5), pages 1156-1166, September.
  12. George Lady & James Quirk, 2010. "The global LeChatelier Principle and multimarket equilibria," Review of Economic Design, Springer, vol. 14(1), pages 193-201, March.
  13. Hennessy, David A., 1997. "The short- and long-run comparative statics of uncertainty," Economics Letters, Elsevier, vol. 55(3), pages 347-353, September.
  14. Natsuko Iwasaki & Victor Tremblay, 2009. "The effect of marketing regulations on efficiency: LeChatelier versus coordination effects," Journal of Productivity Analysis, Springer, vol. 32(1), pages 41-54, August.
  15. Roberts, Kevin, 1999. "Rationality and the LeChatelier Principle," Journal of Economic Theory, Elsevier, vol. 87(2), pages 416-428, August.
  16. Zafirovski, Milan, 2002. "Reconsidering equilibrium: a socio-economic perspective," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(5), pages 559-579.
  17. Anne-Christine Barthel, 2013. "Extending The Scope Of Monotone Comparative Statics Results," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201305, University of Kansas, Department of Economics, revised May 2013.

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