Substitution Effects in Intertemporal Problems

Davide Dragone and Paolo Vanin

American Economic Journal: Microeconomics, 2022, vol. 14, issue 3, 791-809

Abstract: We consider a broad class of intertemporal economic problems and characterize the short-run and long-run responses of the demand for a good to a permanent increase in its market price. Depending on the interplay between self-productivity and time discounting, we show that dynamic substitution effects can generate price elasticities of opposite signs in the short run and in the long run.

JEL-codes: D11 D15 H20 J22 J24 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Substitution Effects in Intertemporal Problems (2020)
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DOI: 10.1257/mic.20200121

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