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Giffen Behavior Independent of the Wealth Level

In: New Insights into the Theory of Giffen Goods

Author

Listed:
  • Junko Doi

    (Kansai University)

  • Kazumichi Iwasa

    (Kyoto University)

  • Koji Shimomura

    (Kobe University)

Abstract

We demonstrate that a well-behaved utility function can generate Giffen behavior, where “well-behaved” means that its indifference curves are smooth, convex, and closed in a commodity space; the resulting demand function of each good is differentiable with respect to prices and income. Moreover, we show that Giffen behavior is compatible with any level of utility and an arbitrarily low share of income spent on the inferior good. This contrasts sharply with the common view that the Giffen paradox tends to occur when households’ wealth levels are low.

Suggested Citation

  • Junko Doi & Kazumichi Iwasa & Koji Shimomura, 2012. "Giffen Behavior Independent of the Wealth Level," Lecture Notes in Economics and Mathematical Systems, in: Wim Heijman & Pierre Mouche (ed.), New Insights into the Theory of Giffen Goods, pages 105-126, Springer.
    • Handle: RePEc:spr:lnechp:978-3-642-21777-7_9
    DOI: 10.1007/978-3-642-21777-7_9
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    Citations

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    Cited by:

    1. Biederman, Daniel K., 2015. "A strictly-concave, non-spliced, Giffen-compatible utility function," Economics Letters, Elsevier, vol. 131(C), pages 24-28.
    2. Massimiliano Landi, 2014. "A Class of Symmetric and Quadratic Utility Functions Generating Giffen Demand," Working Papers 21-2014, Singapore Management University, School of Economics.
    3. Le Van, Cuong & Pham, Ngoc-Sang, 2020. "Demand and equilibrium with inferior and Giffen behaviors," Mathematical Social Sciences, Elsevier, vol. 103(C), pages 45-50.
    4. Landi, Massimiliano, 2015. "A class of symmetric and quadratic utility functions generating Giffen demand," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 50-54.
    5. 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.
    6. Franks, Edwin & Bryant, William D.A., 2018. "The Uncompensated Law of Demand in an exchange economy," Economics Letters, Elsevier, vol. 168(C), pages 127-131.
    7. Sushama Murty, 2012. "Microfoundations for the Environmental Kuznets Curve: Invoking By-Production, Normality and Inferiority of Emissions," Discussion Papers 1203, University of Exeter, Department of Economics.
    8. Kazuyuki Sasakura, 2021. "Calculating a Giffen Good," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 349-369, November.
    9. Zhu, Drew, 2016. "The Mechanism of Giffen Behaviour," MPRA Paper 75707, University Library of Munich, Germany.
    10. Sproule, Robert A., 2020. "The delimitation of Giffenity for the Wold-Juréen (1953) utility function using relative prices: A note," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 14, pages 1-8.
    11. Peter Moffatt & Keith Moffatt, 2011. "Mirror utility functions and reflexion properties of various classes of goods," University of East Anglia Applied and Financial Economics Working Paper Series 031, School of Economics, University of East Anglia, Norwich, UK..
    12. Olli Salmensuu, 2021. "Potato Importance for Development Focusing on Prices," JRFM, MDPI, vol. 14(3), pages 1-14, March.
    13. Ian Hamilton, 2025. "Fantastic Giffen goods and where to find them," Economics Bulletin, AccessEcon, vol. 45(1), pages 55-62.
    14. Massimiliano Landi, 2012. "Single Peakedness and Giffen Demand," Working Papers 02-2012, Singapore Management University, School of Economics.
    15. Hoang, Hoa & Meyers, William H., 2015. "Rice demand in Vietnam: Dietary changes and implications for policy," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196621, Southern Agricultural Economics Association.
    16. Eric Bond & Kazumichi Iwasa & Kazuo Nishimura, 2011. "A dynamic two country Heckscher–Ohlin model with non-homothetic preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(1), pages 171-204, September.

    More about this item

    Keywords

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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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