Omega-Homothetic Preferences: Theory and Applications
AbstractThis paper develops a new class of homothetic preferences that generate Marshallian demand curves for individual goods which can be concave, convex or linear in own price under the assumption that agents treat aggregate price indices as given (as in Dixit-Stiglitz, 1977). The preferences are represented by a cost function that has two parameters: one determining the curvature of the Marshallian demand; the other determining the elasticity of demand when all prices are equal. The elasticity of demand varies with relative prices. Illustrative examples are given of Cournot duopoly and exchange rate pass-through. Copyright 2001 by Scottish Economic Society.
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Bibliographic InfoArticle provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.
Volume (Year): 48 (2001)
Issue (Month): 2 (May)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0036-9292
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- Huw Dixon & Panayiotis M. Pourpourides, 2011.
"On Imperfect Competition with Occasionally Binding Cash-in-Advance Constraints,"
Working Papers, Central Bank of Cyprus
2011-3, Central Bank of Cyprus.
- Dixon, Huw David & Pourpourides, Panayiotis M., 2012. "On Imperfect Competition with Occasionally Binding Cash-in-Advance Constraints," Cardiff Economics Working Papers E2012/3, Cardiff University, Cardiff Business School, Economics Section.
- Bertoletti, Paolo, 2006. "Logarithmic quasi-homothetic preferences," Economics Letters, Elsevier, Elsevier, vol. 90(3), pages 433-439, March.
- Monica Correa Lopez, 2003. "Extended linear-homothetic preferences and the Cournot-Bertrand profit differential," Economics Discussion Papers, University of Essex, Department of Economics 569, University of Essex, Department of Economics.
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