Chambers, Christopher P. and Echenique, Federico and Shmaya, Eran (2010) On behavioral complementarity and its implications. Journal of Economic Theory, 145 (6). pp. 2332-2355. ISSN 0022-0531 http://resolver.caltech.edu/CaltechAUTHORS:20101004-113353153
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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.
|Additional Information:||© 2010 Elsevier Inc. Received 24 June 2009; revised 21 April 2010; accepted 30 May 2010. Available online 1 September 2010. 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 are affiliated with the Division of the Humanities and Social Sciences, California Institute of Technology, Pasadena CA 91125. Shmaya is affiliated with the Kellogg School of Management at Northwestern University, 2001 Sheridan Road, Evanston, IL 60208-2001. Chambers and Echenique acknowledge support from the NSF through grant SES-0751980.|
|Subject Keywords:||Revealed preference; Gross complements; Demand theory|
|Classification Code:||JEL classification codes: D11; D12|
|Official Citation:||Chambers, C. P., F. Echenique, et al. (2010). "On behavioral complementarity and its implications." Journal of Economic Theory 145(6): 2332-2355.|
|Usage Policy:||No commercial reproduction, distribution, display or performance rights in this work are provided.|
|Deposited By:||Shirley Johnson|
|Deposited On:||01 Dec 2010 22:35|
|Last Modified:||26 Dec 2012 12:29|
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