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The Generalized Alchian–Allen Theorem: A Slutsky Equation For Relative Demand

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Listed:
  • Junichi Minagawa
  • Thorsten Upmann

Abstract

type="main" xml:id="ecin12205-abs-0001"> We generalize the Alchian–Allen theorem so as to account for income and endowment effects and provide two versions of a Generalized Alchian–Allen theorem: one for a unit cost component and one for a proportional cost component. Both versions provide a decomposition of an uncompensated change in the demand ratio of two goods into a substitution effect and an income-endowment effect—and may thus be regarded as extensions of the familiar Slutsky equation for relative demand. Finally, we apply our results to the choice of real estates and to parental time allocation decisions, the latter providing implications for child care policies . ( JEL D11, H21, J22, R21)

Suggested Citation

  • Junichi Minagawa & Thorsten Upmann, 2015. "The Generalized Alchian–Allen Theorem: A Slutsky Equation For Relative Demand," Economic Inquiry, Western Economic Association International, vol. 53(4), pages 1893-1907, October.
    • Handle: RePEc:bla:ecinqu:v:53:y:2015:i:4:p:1893-1907
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    References listed on IDEAS

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    Cited by:

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    3. Junichi Minagawa & Thorsten Upmann, 2016. "Price Effects on Compound Commodities," CESifo Working Paper Series 6060, CESifo.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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