The LeChatelier Principle

Paul Milgrom and John Roberts

American Economic Review, 1996, vol. 86, issue 1, 173-79

Abstract: The LeChatelier principle, in the form introduced into economics by Paul A. Samuelson, asserts that, at a point of long-run equilibrium, the derivative of long-run compensated demand with respect to own price is larger in magnitude than the derivative of short-run compensated demand. The authors introduce an extended LeChatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory. This extension also clarifies the intuitive basis of the principle. Copyright 1996 by American Economic Association.

Date: 1996
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