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Purchasing-power-dependent Preferences as a New Explanation of Giffen Behaviour: A Note
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Clemens Heuson
Published/Copyright:
March 16, 2016
Summary
This paper develops an example beyond traditional microeconomic theory that provides a new explanation of Giffen behaviour. Maslow’s hierarchy of needs suggests that an individual’s preferences are not fixed but, rather, depend on purchasing power. A decrease in purchasing power with respect to low-hierarchy goods (e.g., bread) is likely to augment an individual’s preferences for such goods and to weaken preferences for high-hierarchy goods (e.g., books). By introducing a simple purchasing-power-dependent utility function that satisfies the standard assumptions, it is shown that the preference-shifting effect can provoke Giffen behaviour.
Online erschienen: 2016-3-16
Erschienen im Druck: 2011-8-1
© 2011 by Lucius & Lucius, Stuttgart
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Articles in the same Issue
- Inhalt / Contents
- Abhandlungen / Original Papers
- Extending the Case for a Beneficial Brain Drain
- Searching for the Concentration-Price Effect in the German Movie Theater Industry
- Value Function Iteration as a Solution Method for the Ramsey Model
- Purchasing-power-dependent Preferences as a New Explanation of Giffen Behaviour: A Note
- Changes in Import Pricing Behaviour: Evidence for Germany
- Robust Estimation of Linear Fixed Effects Panel Data Models with an Application to the Exporter Productivity Premium
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