Consumers' surplus when individuals lack integrated preferences: A development of some ideas from Dupuit.

In modern economics, consumers' surplus is understood as the sum of individuals' compensating variations, defined by reference to well-behaved preferences. If individuals lack integrated preferences, as behavioural economics suggests they often do, consumers' surplus cannot be defined. However, Dupu...

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Published in:European Journal of the History of Economic Thought Vol. 22; no. 6; pp. 1042 - 1064
Main Author: Sugden, Robert
Format: Article
Published: Taylor & Francis Ltd Dec2015
Subjects:
Online Access:View this record in EBSCOhost
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        atl: Consumers' surplus when individuals lack integrated preferences: A development of some ideas from Dupuit.
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        au: Sugden, Robert
      su:
        Consumers' surplus
        Consumer preferences research
        Prices
        Demand function
        Dupuit, J. (Jules), 1804-1866
      sug:
        subj:
          Consumers' surplus
          Consumer preferences research
          Prices
          Demand function
          Dupuit, J. (Jules), 1804-1866
      keyword:
        Dupuit
        integrated preferences
        price discrimination
      ab: In modern economics, consumers' surplus is understood as the sum of individuals' compensating variations, defined by reference to well-behaved preferences. If individuals lack integrated preferences, as behavioural economics suggests they often do, consumers' surplus cannot be defined. However, Dupuit – the earliest theorist of consumers' surplus – did not assume integrated preferences. His concept of consumers' surplus can be interpreted in terms of the maximum yield of discriminatory prices. In principle, this can be measured without making assumptions about preferences, but (contrary to what Dupuit apparently thought) is not, in general, equal to the area under the observed demand curve.
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