Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Preference Conditions for Invertible Demand Functions†

Preference Conditions for Invertible Demand Functions† AbstractIt is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the corresponding characterization has remained elusive. We identify necessary and sufficient conditions on a utility-maximizing consumer’s preferences for her demand function to be continuous and invertible: strict convexity, strict monotonicity, and differentiability in the sense of Rubinstein (2006). We further show that Rubinstein differentiability is equivalent to the indifference sets being smooth, which is weaker than Debreu’s (1972) notion of preference smoothness. We finally discuss implications of our analysis for demand functions that satisfy the “strict law of demand.” (JEL DO1, D11) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Preference Conditions for Invertible Demand Functions†

Preference Conditions for Invertible Demand Functions†

American Economic Journal: Microeconomics , Volume 14 (2) – May 1, 2022

Abstract

AbstractIt is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the corresponding characterization has remained elusive. We identify necessary and sufficient conditions on a utility-maximizing consumer’s preferences for her demand function to be continuous and invertible: strict convexity, strict monotonicity, and differentiability in the sense of Rubinstein (2006). We further show that Rubinstein differentiability is equivalent to the indifference sets being smooth, which is weaker than Debreu’s (1972) notion of preference smoothness. We finally discuss implications of our analysis for demand functions that satisfy the “strict law of demand.” (JEL DO1, D11)

Loading next page...
 
/lp/american-economic-association/preference-conditions-for-invertible-demand-functions-tEewYDAFvN
Publisher
American Economic Association
Copyright
Copyright © 2022 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20190262
Publisher site
See Article on Publisher Site

Abstract

AbstractIt is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the corresponding characterization has remained elusive. We identify necessary and sufficient conditions on a utility-maximizing consumer’s preferences for her demand function to be continuous and invertible: strict convexity, strict monotonicity, and differentiability in the sense of Rubinstein (2006). We further show that Rubinstein differentiability is equivalent to the indifference sets being smooth, which is weaker than Debreu’s (1972) notion of preference smoothness. We finally discuss implications of our analysis for demand functions that satisfy the “strict law of demand.” (JEL DO1, D11)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: May 1, 2022

There are no references for this article.