Utility Functions and Global Regularity of Fractional Demand Systems

Lewbel, Arthur

Utility Functions and Global Regularity of Fractional Demand Systems

International Economic Review, 1995, vol. 36, issue 4, 943-61

Abstract: Fractional demand systems are utility derived demands having quantities or budget shares proportional to ag + bf, where g and f are functions of income and a and b vary across goods and are functions of prices. Many known demand systems that have large regular regions are fractional. This paper derives the indirect utility functions that generate all fractional demand systems, shows that these systems can all have large regular regions, and provides sufficient conditions for their global or nearly global regularity. An extension to rank three fractional demands is provided. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1995
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