The Generalized Alchian-Allen Theorem
AbstractThe Alchian-Allen substitution theorem states that an increase of the prices of two similar goods by the same amount leads to a relative increase in the compensated demand of the more expensive good. In this paper we generalize this theorem to ordinary demand functions and show under which conditions the Alchian-Allen result continues to hold when income and endowment effects are taken into account.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3969.
Date of creation: 2012
Date of revision:
The Alchian-Allen theorem; income and endowment effects;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
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NBER Working Papers
9023, National Bureau of Economic Research, Inc.
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