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The LeChatelier Principle

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  • Paul Milgrom
  • John Roberts

Abstract

Forthcoming in the American Economic Review The LeChatelier principle, in the form introduced into economics by Samuelson, asserts that at a point of long-run equilibrium, the derivative of long-run compensated demand with respect to own price is larger in magnitude than the derivative of short-run compensated demand. We introduce an extended LeChatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory. This extension also clarifies the intuitive basis of the principle. JEL classification numbers: C60, D10, D20.

Suggested Citation

  • Paul Milgrom & John Roberts, "undated". "The LeChatelier Principle," Working Papers 95007, Stanford University, Department of Economics.
  • Handle: RePEc:wop:stanec:95007
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    File URL: http://www-econ.stanford.edu/faculty/workp/swp95007.ps
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    References listed on IDEAS

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    1. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-180, January.
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    More about this item

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General

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