TY - JOUR
T1 - On the applicability of Marshallian partial-equilibrium analysis
AU - Miyake, Mitsunobu
N1 - Funding Information:
Earlier versions of this paper were presented at 2004 Far Eastern Meeting of Econometric Society (Yonsei University, Korea) and 2005 World Congress of Econometric Society (University College London, UK). I would like to thank an associate editor and a referee of this journal for their constructive comments and suggestions. The research of this paper is partially supported by Ministry of Education, Science and Culture through JSPS Grant-in-Aids for Scientific Research No. 14530001.
PY - 2006/9
Y1 - 2006/9
N2 - Marshallian partial-equilibrium analysis is fully justified for well-behaved (downward sloping and consistent with consumer surplus) Marshallian demand functions. However, a demand function is well-behaved only if it is the demand for a neutral good with no income effects. In a two-good setting with a normal good and a numéraire, this paper proposes a weaker concept of well-behavedness, which requires a demand function to be well-behaved only for large income levels. It also provides necessary and sufficient conditions for a utility function to generate a demand function for a normal good which is well-behaved in this sense. This result clarifies the scope and limitations of the partial-equilibrium analysis in terms of agents' characteristics within the two-good setting.
AB - Marshallian partial-equilibrium analysis is fully justified for well-behaved (downward sloping and consistent with consumer surplus) Marshallian demand functions. However, a demand function is well-behaved only if it is the demand for a neutral good with no income effects. In a two-good setting with a normal good and a numéraire, this paper proposes a weaker concept of well-behavedness, which requires a demand function to be well-behaved only for large income levels. It also provides necessary and sufficient conditions for a utility function to generate a demand function for a normal good which is well-behaved in this sense. This result clarifies the scope and limitations of the partial-equilibrium analysis in terms of agents' characteristics within the two-good setting.
KW - Consumer surplus
KW - Downward sloping property
KW - Marshallian demand function
KW - Normal good
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U2 - 10.1016/j.mathsocsci.2006.05.003
DO - 10.1016/j.mathsocsci.2006.05.003
M3 - Article
AN - SCOPUS:33748434000
SN - 0165-4896
VL - 52
SP - 176
EP - 196
JO - Mathematical Social Sciences
JF - Mathematical Social Sciences
IS - 2
ER -