Munich Personal RePEc Archive

A Behavioural Approach to Kinked Demand Curves

Stavros, Drakopoulos (1992): A Behavioural Approach to Kinked Demand Curves. Published in: The Cyprus Journal of Economics , Vol. 5, No. 1 (June 1992): pp. 1-14.

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Abstract

The starting point of this paper is the significance for economic theory of the introduction of threshold sensitive behavior which is better known in psychology as the Weber-Fechner Law. It is shown that the incorporation of this Law can give an individual multi-kinked demand curve which can be approximated as a market demand curve of the Sweezy type. In terms of macroeconomic significance, the Law can be connected to income policies, saving behavior and expectations in the money markets.

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