The Uncompensated Law of Demand: a ‘Revealed Preference’ approach

Edwin Franks; William D A Bryant

doi:10.1016/j.econlet.2017.01.010

The Uncompensated Law of Demand: a ‘Revealed Preference’ approach

Edwin Franks^*, William D A Bryant

^*Corresponding author for this work

Department of Economics

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

Milleron and Malinvaud (1974), Mityushin and Polterovich (1978) and others, provide conditions under which the Uncompensated Law of Demand (ULD) holds. These conditions are based on properties of the consumer's (unobservable) utility function. In this paper we introduce the new idea of a ‘Giffen commodity vector’ and show how, in terms of it and the derivative of a consumer's inverse demand, a new necessary and sufficient condition for the ULD may be obtained. As both the Giffen vector and a consumer's inverse demand are observable, this allows us to obtain a ‘Revealed Preference’ style necessary and sufficient condition for the ULD without relying on conditions based on unobservables such as differential or curvature properties of a consumer's utility function.

Original language	English
Pages (from-to)	105-111
Number of pages	7
Journal	Economics Letters
Volume	152
DOIs	https://doi.org/10.1016/j.econlet.2017.01.010
Publication status	Published - 1 Mar 2017

Keywords

Giffen commodity vector
Giffen price vector
Inverse demand
Monotone
Observables
Uncompensated Law of Demand

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10.1016/j.econlet.2017.01.010

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title = "The Uncompensated Law of Demand: a {\textquoteleft}Revealed Preference{\textquoteright} approach",

abstract = "Milleron and Malinvaud (1974), Mityushin and Polterovich (1978) and others, provide conditions under which the Uncompensated Law of Demand (ULD) holds. These conditions are based on properties of the consumer's (unobservable) utility function. In this paper we introduce the new idea of a {\textquoteleft}Giffen commodity vector{\textquoteright} and show how, in terms of it and the derivative of a consumer's inverse demand, a new necessary and sufficient condition for the ULD may be obtained. As both the Giffen vector and a consumer's inverse demand are observable, this allows us to obtain a {\textquoteleft}Revealed Preference{\textquoteright} style necessary and sufficient condition for the ULD without relying on conditions based on unobservables such as differential or curvature properties of a consumer's utility function.",

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AU - Bryant, William D A

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AB - Milleron and Malinvaud (1974), Mityushin and Polterovich (1978) and others, provide conditions under which the Uncompensated Law of Demand (ULD) holds. These conditions are based on properties of the consumer's (unobservable) utility function. In this paper we introduce the new idea of a ‘Giffen commodity vector’ and show how, in terms of it and the derivative of a consumer's inverse demand, a new necessary and sufficient condition for the ULD may be obtained. As both the Giffen vector and a consumer's inverse demand are observable, this allows us to obtain a ‘Revealed Preference’ style necessary and sufficient condition for the ULD without relying on conditions based on unobservables such as differential or curvature properties of a consumer's utility function.

KW - Giffen commodity vector

KW - Giffen price vector

KW - Inverse demand

KW - Monotone

KW - Observables

KW - Uncompensated Law of Demand

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SN - 0165-1765

VL - 152

SP - 105

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JO - Economics Letters

JF - Economics Letters

ER -

The Uncompensated Law of Demand: a ‘Revealed Preference’ approach

Abstract

Keywords

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