Connected Substitutes and Invertibility of Demand

Steven Berry (), Amit Gandi and Philip Haile
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Amit Gandi: Dept. of Economics, University of Wisconsin-Madison

No 1806, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We consider the invertibility of a nonparametric nonseparable demand system. Invertibility of demand is important in several contexts, including identification of demand, estimation of demand, testing of revealed preference, and economic theory requiring uniqueness of market clearing prices. We introduce the notion of "connected substitutes" and show that this structure is sufficient for invertibility. The connected substitutes conditions require weak substitution between all goods and sufficient strict substitution to necessitate treating them in a single demand system. These conditions are satisfied in many standard models, have transparent economic interpretation, and allow us to show invertibility without functional form restrictions, smoothness assumptions, or strong domain restrictions.

Keywords: Demand; Invertibility; Connected substitutes (search for similar items in EconPapers)
JEL-codes: C3 D03 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011-06
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Connected Substitutes and Invertibility of Demand (2013)
Working Paper: Connected Substitutes and Invertibility of Demand (2012)
Working Paper: Connected Substitutes and Invertibility of Demand (2012)
Working Paper: Connected Substitutes and Invertibility of Demand (2011)
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