On behavioral complementarity and its implications

Christopher P. Chambers; Federico Echenique; Eran Shmaya

doi:10.1016/j.jet.2010.08.004

On behavioral complementarity and its implications

Christopher P. Chambers, Federico Echenique^*, Eran Shmaya

^*Corresponding author for this work

Managerial Economics, Decision Sciences and Operations

Research output: Contribution to journal › Article › peer-review

5 Scopus citations

Abstract

We study the behavioral definition of complementary goods: if the price of one good increases, demand for a complementary good must decrease. We obtain its full implications for observable demand behavior (its testable implications), and for the consumer's underlying preferences. We characterize those data sets which can be generated by rational preferences exhibiting complementarities. The class of preferences that generate demand complements has Leontief and Cobb-Douglas as its as extreme members.

Original language	English (US)
Pages (from-to)	2332-2355
Number of pages	24
Journal	Journal of Economic Theory
Volume	145
Issue number	6
DOIs	https://doi.org/10.1016/j.jet.2010.08.004
State	Published - Nov 2010

Keywords

Demand theory
Gross complements
Revealed preference

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/j.jet.2010.08.004

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title = "On behavioral complementarity and its implications",

abstract = "We study the behavioral definition of complementary goods: if the price of one good increases, demand for a complementary good must decrease. We obtain its full implications for observable demand behavior (its testable implications), and for the consumer's underlying preferences. We characterize those data sets which can be generated by rational preferences exhibiting complementarities. The class of preferences that generate demand complements has Leontief and Cobb-Douglas as its as extreme members.",

keywords = "Demand theory, Gross complements, Revealed preference",

author = "Chambers, {Christopher P.} and Federico Echenique and Eran Shmaya",

note = "Funding Information: ✩ We thank Larry Epstein, John Quah, and audiences at various seminars and conferences for comments. We also thank an Associate Editor and three anonymous referees for their comments. Chambers and Echenique acknowledge support from the NSF through grant SES-0751980. * Corresponding author. E-mail addresses: chambers@hss.caltech.edu (C.P. Chambers), fede@caltech.edu (F. Echenique), e-shmaya@kellogg.northwestern.edu (E. Shmaya).",

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AU - Shmaya, Eran

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N2 - We study the behavioral definition of complementary goods: if the price of one good increases, demand for a complementary good must decrease. We obtain its full implications for observable demand behavior (its testable implications), and for the consumer's underlying preferences. We characterize those data sets which can be generated by rational preferences exhibiting complementarities. The class of preferences that generate demand complements has Leontief and Cobb-Douglas as its as extreme members.

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KW - Gross complements

KW - Revealed preference

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On behavioral complementarity and its implications

Abstract

Keywords

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