Calculating a Giffen Good

Kazuyuki Sasakura (sasakura@waseda.jp)
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Kazuyuki Sasakura: Faculty of Political Science and Economics, Waseda Universi

No 1908, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: This paper provides a simple example of the utility function with two consumption goods which can be calculated by hand to produce a Giffen good. It is based on the theoretical result by Kubler, Selden, and Wei (2013). Using a model of portfolio selection with a risk-free asset and a risky asset, they showed that the risk-free asset becomes a Giffen good if the utility belongs to the HARA family. This paper investigates their result further in a usual microeconomic setting, and derives the conditions for one of the consumption goods to be a Giffen good from a broader perspective.

Keywords: HARA family; Decreasing relative risk aversion; Giffen good; Slutsky equation; Ratio effect (search for similar items in EconPapers)
JEL-codes: D01 D11 G11 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2019-06
New Economics Papers: this item is included in nep-cwa, nep-mic, nep-ore and nep-upt
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