Connected Substitutes and Invertibility of Demand

Steven Berry (), Amit Gandi and Philip Haile ()
Additional contact information
Amit Gandi: Dept. of Economics, University of Wisconsin-Madison
Philip Haile: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/philip-haile

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

Abstract: We consider the invertibility (injectivity) 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 exploiting existence of an inverse demand function or (in an exchange economy) uniqueness of Walrasian equilibrium 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. The connected substitutes conditions have transparent economic interpretation, are easily checked, and are satisfied in many standard models. They need only hold under some transformation of demand and can accommodate many models in which goods are complements. They allow one to show invertibility without strict gross substitutes, functional form restrictions, smoothness assumptions, or strong domain restrictions. When the restriction to weak substitutes is maintained, our sufficient conditions are also "nearly necessary" for even local invertibility.

Keywords: Univalence; Injectivity; Weak substitutes; Complements (search for similar items in EconPapers)
JEL-codes: C3 D03 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-06, Revised 2012-07
Note: CFP 1391
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Econometrica (September 2013), 81(5): 2087-2111

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d18/d1806-r.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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 (2011)
Working Paper: Connected Substitutes and Invertibility of Demand (2011)
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:cwl:cwldpp:1806r

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().