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Not so demanding: Preference structure, firm behavior, and welfare

  • Peter Neary
  • Monika Mrazova

We introduce two new tools for relating preferences and demand to firm behavior and economic performance. The "Demand Manifold" links the elasticity and convexity of an arbitrary demand function; the "Utility Manifold" links the elasticity and concavity of an arbitrary utility function. Along the way we present some new families of demand functions; show how the structure of demand and preferences determine the responses of monopoly firms and monopolistically competitive industries to exogenous shocks; characterize the efficiency of a monopolistically competitive equilibrium; and present a quantitative framework for predicting the welfare effects of exogenous shocks.

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File URL: http://www.economics.ox.ac.uk/materials/papers/13172/paper691.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 691.

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Date of creation: 31 Dec 2013
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Handle: RePEc:oxf:wpaper:691
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  10. Kimball, Miles S, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1241-77, November.
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  12. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
  13. Pettengill, John S, 1979. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, vol. 69(5), pages 957-60, December.
  14. Gita Gopinath & Oleg Itskhoki, 2010. "Frequency of Price Adjustment and Pass-Through," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 675-727.
  15. Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Oxford University Press, vol. 38(4), pages 401-414.
  16. Paolo Bertoletti & Paolo Epifani, 2012. "Monopolistic Competition: CES Redux?," DEM Working Papers Series 004, University of Pavia, Department of Economics and Management.
  17. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  18. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  19. Costas Arkolakis & Arnaud Costinot & Dave Donaldson & Andrés Rodríguez-Clare, 2015. "The Elusive Pro-Competitive Effects of Trade," NBER Working Papers 21370, National Bureau of Economic Research, Inc.
  20. Atkin, David & Donaldson, Dave, 2015. "Who’s Getting Globalized? The Size and Implications of Intra-national Trade Costs," CEPR Discussion Papers 10759, C.E.P.R. Discussion Papers.
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