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Published November 2010 | Submitted
Journal Article Open

On behavioral complementarity and its implications


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.

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