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Calculating a Giffen Good

Author

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  • Kazuyuki Sasakura

    (Faculty of Political Science and Economics, Waseda Universi)

Abstract

This paper provides a simple example of the utility function with two consumption goods which can be calculated by hand to produce a Giffen good. It is based on the theoretical result by Kubler, Selden, and Wei (2013). Using a model of portfolio selection with a risk-free asset and a risky asset, they showed that the risk-free asset becomes a Giffen good if the utility belongs to the HARA family. This paper investigates their result further in a usual microeconomic setting, and derives the conditions for one of the consumption goods to be a Giffen good from a broader perspective.

Suggested Citation

  • Kazuyuki Sasakura, 2019. "Calculating a Giffen Good," Working Papers 1908, Waseda University, Faculty of Political Science and Economics.
    • Handle: RePEc:wap:wpaper:1908
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    References listed on IDEAS

    as
    1. Meyer, Donald J. & Meyer, Jack, 2005. "Risk preferences in multi-period consumption models, the equity premium puzzle, and habit formation utility," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1497-1515, November.
    2. Kazuyuki Sasakura, 2016. "Slutsky Revisited: A New Decomposition of the Price Effect," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(2), pages 253-280, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    HARA family; Decreasing relative risk aversion; Giffen good; Slutsky equation; Ratio effect;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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