The Delimitation of Giffenity for The Wold-Juréen (1953) Utility Function Using Relative Prices: A Note

Sproule, Robert (2019): The Delimitation of Giffenity for The Wold-Juréen (1953) Utility Function Using Relative Prices: A Note.

Abstract

In the study of Giffen behavior or “Giffenity”, there remains a paradox. On one hand, the Wold-Juréen (1953) utility function has been touted as the progenitor of a multi-decade search for those two-good, particular utility functions, which exhibit Giffenity. On the other hand, there is no evidence that the Wold-Juréen (1953) utility function has ever been fully evaluated for Giffenity, with perhaps one minor exception, Weber (1997). But there, Weber (1997) showed that the Giffenity of Good 1 depends upon the relative magnitude of income vis-à-vis the price of Good 2. Weber’s precondition is so vague that it lacks broad appeal. This paper offers a new and a clear cut precondition for Giffen behavior under the Wold-Juréen (1953) utility function. That is, we show that if the price of Good 1 is greater than or equal to the price of Good 2, then Good 1 is a Giffen good.

• Item Type: MPRA Paper
• Language: English
• Keywords: Slutsky decomposition, Giffen paradox, Wold-Juréen (1953) utility function
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A22 - Undergraduate; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A23 - Graduate; D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory

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