A conditional demand approach to the Alchian–Allen effect

Junichi Minagawa and Thorsten Upmann

Economics Letters, 2013, vol. 120, issue 3, 546-551

Abstract: We explore the Alchian–Allen effect–that is, the effect of an absolutely equal increase in the price of two goods on their demand ratio–for conditional (viz. short-run) and unconditional (viz. long-run) demand functions. We show that the Alchian–Allen effect for unconditional demand equals its conditional counterpart (where the consumption level of a third good is held constant) if the two goods feature identical substitution elasticities with the third good. Remarkably, this result holds true for both Hicksian and Marshallian demand functions.

Keywords: Alchian–Allen theorem; Conditional and unconditional demand functions; Compensated and uncompensated price elasticities (search for similar items in EconPapers)
JEL-codes: D11 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176513002991
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:3:p:546-551

DOI: 10.1016/j.econlet.2013.06.017

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().