The Rotterdam Demand Model Half a Century On

Kenneth Clements and Grace Gao ()

No 14-34, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Half a century ago, Barten (1964) and Theil (1965) formulated what is now known as the Rotterdam model. A path-breaking innovation, this system of demand equations allowed for the first time rigorous testing of the theory of the utility-maximising consumer. This has led to a vibrant, on-going strand of research on the theoretical underpinnings of the model, extensions and numerous applications. But perhaps due to its European heritage and unorthodox derivation, there is still misunderstanding and a tendency for the Rotterdam model to be regarded with reservations and/or uncertainties (if not mistrust). This paper marks the golden jubilee of the model by clarifying its economic foundations, highlighting its strengths and weaknesses, elucidating its links with other models of consumer demand, and dealing with some recent developments that have their roots in Barten and Theil’s pioneering research of the 1960s.

Pages: 56 pages
Date: 2014
New Economics Papers: this item is included in nep-his and nep-upt
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Citations: View citations in EconPapers (2)

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Journal Article: The Rotterdam demand model half a century on (2015)
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