On the commutativity of expansion and substitution effects

Andrea Mantovi ()

Journal of Economics, 2013, vol. 110, issue 1, 83-105

Abstract: The reversibility of sequential economic choices concerning production and consumption is addressed. A geometric approach to substitution effects and output/income effects is set forth in terms of vector fields on bundle space. By means of suitable fixing relations the 0-homogeneity of such problems can be circumvented, so as to define global parametrizations of effects, for which Lie brackets measure the departure from commutativity. A couple of propositions are established, assessing the benchmark relevance of homothetic models. Application to Farrell decompositions, as tailored by Bogetoft et al. (Eur J Oper Res 168:450–462, 2006 ), results in complete agreement with the results found by such Authors. The theoretical relevance of the approach is thoroughly discussed. Copyright Springer-Verlag Wien 2013

Keywords: Partial equilibrium; Homotheticity; Substitution effect; Output effect; Income effect; Technical efficiency; Allocative efficiency; D00; D11; D20 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:110:y:2013:i:1:p:83-105

DOI: 10.1007/s00712-013-0337-5

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