Giffen Behaviour and Asymmetric Substitutability
Let a consumer consume two goods, and let good 1 be a Giffen good. Then a wellknown necessary condition for such behaviour is that good 1 is an inferior good. This paper shows that an additional necessary for such behaviour is that good 1 is a gross substitute for good 2, and that good 2 is a gross complement to good 1 (strong asymmetric gross substitutability). It is argued that identifying asymmetric gross substitutability as an additional necessary condition gives better insight into Giffen behaviour, both on an analytical level and an intuitive level. In particular, the paper uses the concept of asymmetric gross substitutability to give a taxonomy of preferences, which includes preferences that are locally characterised by Giffen behaviour, and also uses this concept to introduce new decompositions of the effect of a change in own price on the demand for a good, different from those known in the literature.
|Date of creation:||Sep 2010|
|Contact details of provider:|| Postal: P.O. Box 80125, NL-3508 TC Utrecht|
Phone: +31 30 253 9800
Fax: +31 30 253 7373
Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kris De Jaegher, 2008.
"Benchmark Two-Good Utility Functions,"
University of Manchester, vol. 76(1), pages 44-65, 01.
- K. de Jaegher, 2007. "Benchmark Two-Good Utility Functions," Working Papers 07-09, Utrecht School of Economics.
- Kris De Jaegher, 2009. "Asymmetric Substitutability: Theory And Some Applications," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 838-855, October.
- K. de Jaegher, 2008. "Asymmetric substitutability: theory and some applications," Working Papers 08-02, Utrecht School of Economics.
When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:1016. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marina Muilwijk)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.