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Benchmark Two-Good Utility Functions

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Author Info
Kris de Jaegher ()

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Abstract

Benchmark two-good utility functions involving a good with zero income elasticity and unit income elasticity are well known. This paper derives utility functions for the additional benchmark cases where one good has zero cross-price elasticity, unit own-price elasticity, and zero own price elasticity. It is shown how each of these utility functions arises from a simple graphical construction based on a single given indifference curve. Also, it is shown that possessors of such utility functions may be seen as thinking in a particular sense of their utility, and may be seen as using simple rules of thumb to determine their demand.

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Paper provided by Utrecht School of Economics in its series Working Papers with number 07-09.

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Length: 20 pages
Date of creation: Feb 2007
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Handle: RePEc:use:tkiwps:0709

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Related research
Keywords: Benchmark Utility Functions; Rules of Thumb;

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Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Werner Güth & Wilhelm Neuefeind, 2001. "Heuristics as Decision Rules - Part I: The Cobb Douglas Consumer," Homo Oeconomicus, Institute of SocioEconomics, vol. 18, pages 177-197.
  2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  3. Moffatt, Peter G., 2002. "Is Giffen behaviour compatible with the axioms of consumer theory?," Journal of Mathematical Economics, Elsevier, vol. 37(4), pages 259-267, July. [Downloadable!] (restricted)
  4. Epstein, Gil S & Spiegel, Uriel, 2000. "A Production Function with an Inferior Input," Manchester School, University of Manchester, vol. 68(5), pages 503-15, September. [Downloadable!] (restricted)
  5. Yin, Xiangkang, 2001. "A Tractable Alternative to Cobb-Douglas Utility for Imperfect Competition," Australian Economic Papers, Blackwell Publishing, vol. 40(1), pages 14-21, March. [Downloadable!] (restricted)
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  6. Liebhafsky, H H, 1969. "New Thoughts About Inferior Goods," American Economic Review, American Economic Association, vol. 59(5), pages 931-34, December. [Downloadable!] (restricted)
  7. Weber, Christian E, 2001. "A Production Function with an Inferior Input: Comment," Manchester School, University of Manchester, vol. 69(6), pages 616-22, December. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kris De Jaegher, 2008. "Asymmetric substitutability: theory and some applications," Working Papers 08-02, Utrecht School of Economics. [Downloadable!]
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