A theory of the perturbed consumer with general budgets / Daniel L. McFadden, Mogens Fosgerau.

Format:

Book

Author/Creator:

McFadden, Daniel L.

Contributor:

National Bureau of Economic Research.

Fosgerau, Mogens.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17953.

NBER working paper series no. w17953

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We consider demand systems for utility-maximizing consumers facing general budget constraints whose utilities are perturbed by additive linear shifts in marginal utilities. Budgets are required to be compact but are not required to be convex. We define demand generating functions (DGF) whose subgradients with respect to these perturbations are convex hulls of the utility-maximizing demands. We give necessary as well as sufficient conditions for DGF to be consistent with utility maximization, and establish under quite general conditions that utility-maximizing demands are almost everywhere single-valued and smooth in their arguments. We also give sufficient conditions for integrability of perturbed demand. Our analysis provides a foundation for applications of consumer theory to problems with nonlinear budget constraints.

Notes:

Print version record

March 2012.