Preference-Theoretic Weak Complementarity: Getting More with Less

David G. Brown

Departmental Working Papers from Department of Economics, Louisiana State University

Abstract: A preference-theoretic characterization of weak complementarity is provided based on an explicit representation of revealed preference. Weak complementarity is defined in terms of the observable property of nonessentiality and the unobservable property of no existence value. Preference-theoretic characterizations of these properties facilitate a precision and intuition that is not generally available within the existing calculus-based literature. An exact welfare measure is specified that does not require a continuous nonmarket good or monotonic preference on the nonmarket good, and which can be easily generalized to accommodate infinite choke prices. It is shown that no existence value can be rejected by revealed preference, contradicting a widely stated assertion within the literature. Even though no existence value is unobservable, it does require an observable condition that is nontrivial with three or more market goods.

Date: 2008-09
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Persistent link: https://EconPapers.repec.org/RePEc:lsu:lsuwpp:2008-09

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