American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Preference Conditions for Invertible Demand Functions
American Economic Journal: Microeconomics
vol. 14,
no. 2, May 2022
(pp. 113–38)
Abstract
It is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the corresponding characterization has remained elusive. We identify necessary and sufficient conditions on a utility-maximizing consumer's preferences for her demand function to be continuous and invertible: strict convexity, strict monotonicity, and differentiability in the sense of Rubinstein (2006). We further show that Rubinstein differentiability is equivalent to the indifference sets being smooth, which is weaker than Debreu's (1972) notion of preference smoothness. We finally discuss implications of our analysis for demand functions that satisfy the "strict law of demand."Citation
Diasakos, Theodoros M., and Georgios Gerasimou. 2022. "Preference Conditions for Invertible Demand Functions." American Economic Journal: Microeconomics, 14 (2): 113–38. DOI: 10.1257/mic.20190262Additional Materials
JEL Classification
- D01 Microeconomic Behavior: Underlying Principles
- D11 Consumer Economics: Theory
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