Understanding Giffen Behavior as an Extreme Case of Asymmetric Substitutability

62 Pages Posted: 23 Dec 2003

See all articles by Kris De Jaegher

Kris De Jaegher

Vrije Universiteit Brussel (VUB) - Micro-economics for Profit and Non Profit Sector (MICE)

Date Written: November 2003

Abstract

Microeconomic textbooks explain Giffen behavior as an extreme case of negative income effects. This focus on income effects is reflected in the numerical examples of preferences mappings that are provided in textbooks, namely preferences involving zero elastic income effects (quasilinear preferences) and unit elastic income effects. This paper shows that additional insight into Giffen behavior can be obtained by considering it as an extreme case of asymmetric substitutability. The paper derives numerical examples of preferences where one good is neither a substitute nor a complement, where one good is neither price elastic nor price inelastic, and where one good is neither an ordinary good nor a Giffen good. These corner-case preferences can be used to gauge any given preference mapping against.

JEL Classification: A22, D11

Suggested Citation

De Jaegher, Kris, Understanding Giffen Behavior as an Extreme Case of Asymmetric Substitutability (November 2003). Available at SSRN: https://ssrn.com/abstract=474860

Kris De Jaegher (Contact Author)

Vrije Universiteit Brussel (VUB) - Micro-economics for Profit and Non Profit Sector (MICE) ( email )

Brussels
Belgium
32 (2) 629 22 14 (Phone)

HOME PAGE: http://www.vub.ac.be/MICE/

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