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Consumers' surplus when individuals lack integrated preferences: A development of some ideas from Dupuit

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  • Robert Sugden

Abstract

In modern economics, consumers' surplus is understood as the sum of individuals' compensating variations, defined by reference to well-behaved preferences. If individuals lack integrated preferences, as behavioural economics suggests they often do, consumers' surplus cannot be defined. However, Dupuit - the earliest theorist of consumers' surplus - did not assume integrated preferences. His concept of consumers' surplus can be interpreted in terms of the maximum yield of discriminatory prices. In principle, this can be measured without making assumptions about preferences, but (contrary to what Dupuit apparently thought) is not, in general, equal to the area under the observed demand curve.

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  • Robert Sugden, 2015. "Consumers' surplus when individuals lack integrated preferences: A development of some ideas from Dupuit," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 22(6), pages 1042-1063, December.
    • Handle: RePEc:taf:eujhet:v:22:y:2015:i:6:p:1042-1063
    DOI: 10.1080/09672567.2015.1084522
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    References listed on IDEAS

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