The LeChatelier Principle

Paul Milgrom and John Roberts

Working Papers from Stanford University, Department of Economics

Abstract: Forthcoming in the American Economic Review

The LeChatelier principle, in the form introduced into economics by Samuelson, asserts that at a point of long-run equilibrium, the derivative of long-run compensated demand with respect to own price is larger in magnitude than the derivative of short-run compensated demand. We introduce an extended LeChatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory. This extension also clarifies the intuitive basis of the principle. JEL classification numbers: C60, D10, D20.

JEL-codes: C60 D10 D20 (search for similar items in EconPapers)
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Journal Article: The LeChatelier Principle (1996)
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