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On Behavioral Complementarity and its Implications

  • Christopher P. Chambers

    ()

    (Division of the Humanities and Social Sciences, California Institute of Technology)

  • Federico Echenique

    ()

    (Division of the Humanities and Social Sciences, California Institute of Technology)

  • Eran Shmaya

    ()

    (Division of the Humanities and Social Sciences, California Institute of Technology)

We study the behavioral de nition of complementary goods: if the price of one good increases, demand for a complementary good must decrease. We obtain its full implications for observable demand behavior (its testable implications), and for the consumer's underlying preferences. We characterize those data sets which can be generated by rational preferences exhibiting complementarities. In a model in which income results from selling an endowment (as in general equilibrium models of exchange economies), the notion is surprisingly strong and is essentially equivalent to Leontief preferences. In the model of nominal income, the notion describes a class of preferences whose extreme cases are Leontief and Cobb-Douglas respectively.

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File URL: http://decon.edu.uy/publica/2007/1007.pdf
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Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 1007.

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Length: 46 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:ude:wpaper:1007
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  1. John Quah, 2002. "The Law of Demand and Risk Aversion," Economics Papers 2002-W3, Economics Group, Nuffield College, University of Oxford.
  2. John K.-H Quah, 2007. "The Comparative Statics of Constrained Optimization Problems," Econometrica, Econometric Society, vol. 75(2), pages 401-431, 03.
  3. Forges, Françoise & Minelli, Enrico, 2009. "Afriat's theorem for general budget sets," Economics Papers from University Paris Dauphine 123456789/4099, Paris Dauphine University.
  4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, 1.
  5. Matzkin, Rosa L, 1991. "Axioms of Revealed Preference for Nonlinear Choice Sets," Econometrica, Econometric Society, vol. 59(6), pages 1779-86, November.
  6. Andreu Mas-Colell, 1978. "On Revealed Preference Analysis," Review of Economic Studies, Oxford University Press, vol. 45(1), pages 121-131.
  7. Lewbel, Arthur, 1996. "Aggregation without Separability: A Generalized Composite Commodity Theorem," American Economic Review, American Economic Association, vol. 86(3), pages 524-43, June.
  8. Donald J. Brown & Caterina Calsamiglia, 2005. "The Nonparametric Approach to Applied Welfare Analysis," Cowles Foundation Discussion Papers 1507, Cowles Foundation for Research in Economics, Yale University.
  9. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar.
  10. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  11. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
  12. Chambers, Christopher P. & Echenique, Federico, 2009. "Supermodularity and preferences," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1004-1014, May.
  13. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  14. Epstein, Larry G, 1981. "Generalized Duality and Integrability," Econometrica, Econometric Society, vol. 49(3), pages 655-78, May.
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