Economic Dark Matter: On the Theory of Substitutability

18 Pages Posted: 22 May 2017

Date Written: May 19, 2017

Abstract

This paper proposes a model of the psychology of behaviour in which theories of economic behaviour based on the assumption of substitutability may coexist with theories based on the assumption of non-substitutability. The whole spectrum of possibilities for substitutability between courses of action is considered: substitutability, non-substitutability and complimentarity. We recover traditional economic theories of behaviour as “making tradeoffs” when we impose the assumption of substitutability. We find that if we suppose non-substitutability there are three kinds of behaviour which may arise which aren’t the result of “making tradeoffs” but instead could be characterised by the statements “it just doesn’t Cut It” (in the case of basic non-substitutability), “I can’t go without this” (in the case of non-substitutability created by the existence of needs) and “together or not at all” (in the case of complimentarity). We thus expand the spectrum of behaviours which economic theory may explain as non-exotic and standard.

Keywords: microeconomic theory, psychology of behaviour, decision, substitutability, non-substitutability, complimentarity

JEL Classification: D010, D030, D110, D210, D800

Suggested Citation

Markey‐Towler, Brendan, Economic Dark Matter: On the Theory of Substitutability (May 19, 2017). Available at SSRN: https://ssrn.com/abstract=2971744 or http://dx.doi.org/10.2139/ssrn.2971744

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