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Integrability and Generalized Separability

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  • Fally, Thibault

Abstract

This paper examines demand systems where the demand for a good depends only on its own price, consumer income, and a single aggregator synthesizing information on all other prices. This generalizes directly-separable preferences where the Lagrange multiplier provides such an aggregator. As indicated by Gorman (1972), symmetry of the Slutsky substitution terms implies that such demand can take only one of two simple forms. Conversely, here we show that only weak conditions ensure that such demand systems are integrable, i.e. can be derived from the maximization of a well-behaved utility function. This paper further studies useful properties and applications of these demand systems.

Suggested Citation

  • Fally, Thibault, 2018. "Integrability and Generalized Separability," CEPR Discussion Papers 12667, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12667
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    2. Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2021. "Market Size, Competition, and the Product Mix of Exporters," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 5, pages 109-150, World Scientific Publishing Co. Pte. Ltd..
    3. Justin Caron & Thibault Fally & James R. Markusen, 2021. "International Trade Puzzles: A Solution Linking Production And Preferences," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 11, pages 199-250, World Scientific Publishing Co. Pte. Ltd..
    4. Justin Caron & Thibault Fally & James Markusen, 2021. "Per capita income and the demand for skills," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 12, pages 251-268, World Scientific Publishing Co. Pte. Ltd..
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    7. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Faber, Benjamin & Fally, Thibault, 2017. "Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data," Department of Economics, Working Paper Series qt7z60j648, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Badis Tabarki, 2020. "International Trade under Monopolistic Competition beyond the CES," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02966937, HAL.
    3. Fally, Thibault, 2019. "Generalized separability and the gains from trade," Economics Letters, Elsevier, vol. 178(C), pages 8-12.
    4. Badis Tabarki, 2020. "International Trade under Monopolistic Competition beyond the CES," Post-Print halshs-02966937, HAL.
    5. Badis Tabarki, 2020. "International Trade under Monopolistic Competition beyond the CES," Documents de travail du Centre d'Economie de la Sorbonne 20018, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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    More about this item

    Keywords

    integrability; non-homothetic preferences; Recoverability; Separable demand; Single aggregator;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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