Working Paper: NBER ID: w17953
Authors: Daniel L. McFadden; Mogens Fosgerau
Abstract: 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.
Keywords: No keywords provided
JEL Codes: C25; D11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| perturbations in marginal utilities (D11) | demand functions (D10) |
| structure of the demand system (D12) | nature of the perturbations (C69) |
| shifts in marginal utilities (D11) | consumer demand (D12) |