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The LeChatelier Principle

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  • Paul Milgrom
  • John Roberts

Abstract

Forthcoming in the American Economic Review The LeChatelier principle, in the form introduced into economics by Samuelson, asserts that at a point of long-run equilibrium, the derivative of long-run compensated demand with respect to own price is larger in magnitude than the derivative of short-run compensated demand. We introduce an extended LeChatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory. This extension also clarifies the intuitive basis of the principle. JEL classification numbers: C60, D10, D20.

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Paper provided by Stanford University, Department of Economics in its series Working Papers with number 95007.

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Handle: RePEc:wop:stanec:95007

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  1. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
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Cited by:
  1. Hennessy, David A., 1997. "The short- and long-run comparative statics of uncertainty," Economics Letters, Elsevier, vol. 55(3), pages 347-353, September.
  2. Nocetti, Diego C., 2013. "The LeChatelier principle for changes in risk," Journal of Mathematical Economics, Elsevier, vol. 49(6), pages 460-466.
  3. Roberts, Kevin, 1999. "Rationality and the LeChatelier Principle," Journal of Economic Theory, Elsevier, vol. 87(2), pages 416-428, August.
  4. Peter Arendorf Bache & Anders Laugesen, 2013. "Monotone Comparative Statics for the Industry Composition," Economics Working Papers 2013-10, School of Economics and Management, University of Aarhus.
  5. Briec, Walter & Kerstens, Kristiaan & Prior, Diego & Van de Woestyne, Ignace, 2010. "Tangency capacity notions based upon the profit and cost functions: A non-parametric approach and a general comparison," Economic Modelling, Elsevier, vol. 27(5), pages 1156-1166, September.
  6. Anne-Christine Barthel, 2013. "Extending The Scope Of Monotone Comparative Statics Results," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201305, University of Kansas, Department of Economics, revised May 2013.
  7. Elena Antoniadou, 2007. "Comparative Statics for the Consumer Problem," Economic Theory, Springer, vol. 31(1), pages 189-203, April.
  8. Natsuko Iwasaki & Victor Tremblay, 2009. "The effect of marketing regulations on efficiency: LeChatelier versus coordination effects," Journal of Productivity Analysis, Springer, vol. 32(1), pages 41-54, August.
  9. Hennessy, David A. & Saak, Alexander, 2002. "State-Contingent Demand for Herbicide-Tolerance Seed Trait," Staff General Research Papers 10123, Iowa State University, Department of Economics.
  10. David A. Hennessy, 2005. "Slaughterhouse Rules: Animal Uniformity and Regulating for Food Safety in Meat Packing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 600-609.
  11. Peter Arendorf Bache & Anders Laugesen, 2013. "An Industry-Equilibrium Analysis of the LeChatelier Principle," Economics Working Papers 2013-16, School of Economics and Management, University of Aarhus.
  12. George Lady & James Quirk, 2010. "The global LeChatelier Principle and multimarket equilibria," Review of Economic Design, Springer, vol. 14(1), pages 193-201, March.
  13. Nti, Kofi O. & Dompere, Kofi K., 1997. "Technological progress and optimal factor demand," International Journal of Production Economics, Elsevier, vol. 49(2), pages 117-130, April.
  14. Lapan, Harvey E. & Hennessy, David A., 2007. "Unit Vs. Ad Valorem Taxes in Multi-Product Cournot Oligopoly," Staff General Research Papers 12780, Iowa State University, Department of Economics.
  15. Zafirovski, Milan, 2002. "Reconsidering equilibrium: a socio-economic perspective," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(5), pages 559-579.
  16. Daron Acemoglu, 2005. "Equilibrium Bias of Technology," NBER Working Papers 11845, National Bureau of Economic Research, Inc.
  17. Julian Jamison, 2006. "The Le Chatelier Principle in lattices," Economics Bulletin, AccessEcon, vol. 3(2), pages 1-9.

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