The Generalized Alchian-Allen Theorem

10 Pages Posted: 31 Oct 2012

See all articles by Junichi Minagawa

Junichi Minagawa

Chuo University - Graduate School of Economics

Thorsten Upmann

Helmholtz Institute for Functional Marine Biodiversity at the University of Oldenburg; Bielefeld University - Department of Business Administration and Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 30, 2012

Abstract

The Alchian-Allen substitution theorem states that an increase of the prices of two similar goods by the same amount leads to a relative increase in the compensated demand of the more expensive good. In this paper we generalize this theorem to ordinary demand functions and show under which conditions the Alchian-Allen result continues to hold when income and endowment effects are taken into account.

Keywords: The Alchian-Allen theorem, income and endowment effects

JEL Classification: D110

Suggested Citation

Minagawa, Junichi and Upmann, Thorsten, The Generalized Alchian-Allen Theorem (October 30, 2012). CESifo Working Paper Series No. 3969, Available at SSRN: https://ssrn.com/abstract=2168633 or http://dx.doi.org/10.2139/ssrn.2168633

Junichi Minagawa

Chuo University - Graduate School of Economics ( email )

Blg 2 Tama Campus
742-1 Higashinakano, Hachioji
Tokyo 192-0393
Japan

Thorsten Upmann (Contact Author)

Helmholtz Institute for Functional Marine Biodiversity at the University of Oldenburg ( email )

Ammerländer Heerstraße 231
Oldenburg, 26129
Germany

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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