On Behavioral Complementarity and its Implications

Christopher P. Chambers, Federico Echenique () and Eran Shmaya ()
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Eran Shmaya: Division of the Humanities and Social Sciences, California Institute of Technology

No 1007, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: We study the behavioral de nition 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. In a model in which income results from selling an endowment (as in general equilibrium models of exchange economies), the notion is surprisingly strong and is essentially equivalent to Leontief preferences. In the model of nominal income, the notion describes a class of preferences whose extreme cases are Leontief and Cobb-Douglas respectively.

Keywords: Afriat's Theorem; Weak Axiom of Revealed Preference; Complementary goods. (search for similar items in EconPapers)
JEL-codes: D11 D12 (search for similar items in EconPapers)
Date: 2007-10

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Working Paper: On behavioral complementarity and its implications (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ude:wpaper:1007

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