ω-Homothetic Preferences: Theory and Applications.
This paper develops a new class of homothetic preferences which generate Marshallian demand curves for individual goods which can be concave, convex or linear in own price under the assumption that agents treat aggregate price indices as given (as in Dixit-Stiglitz, 1977). The preferences are repres...
| Published in: | Scottish Journal of Political Economy Vol. 48; no. 2 |
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| Main Authors: | , |
| Format: | Article |
| Published: |
Wiley-Blackwell
May2001
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| Subjects: | |
| Online Access: | View this record in EBSCOhost |
| Summary: | This paper develops a new class of homothetic preferences which generate Marshallian demand curves for individual goods which can be concave, convex or linear in own price under the assumption that agents treat aggregate price indices as given (as in Dixit-Stiglitz, 1977). The preferences are represented by a cost function which has two parameters: one determining the curvature of the Marshallian demand; the other determining the elasticity of demand when all prices are equal. The elasticity of demand varies with relative prices. Illustrative examples are given of Cournot duopoly and exchange rate pass-through. |
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