On Why the Wold-Juréen (1953) Utility Function Cannot Generate a Giffen Good

Abstract

Presently, it is widely accepted that the particular utility function first reported by Wold and Juréen (1953), and later by Weber (1997), is capable of generating a Giffen good. This note challenges this view by showing that this Wold-Juréen (1953) utility function is not well-behaved, and that, as a consequence, it does not satisfy the second-order condition for an interior maximum related to the consumer-maximization problem. In view of this, it is argued here that: (a) not only is this utility function incapable of generating a Giffen good, but by extension (b) the so-called demand functions reported by Weber (1997) are not demand functions.

JEL Classification: A2, D1