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omega-Homothetic Preferences: Theory and Applications

Datta, Bipasa and Dixon, Huw David 2001. omega-Homothetic Preferences: Theory and Applications. Scottish Journal of Political Economy 48 (2) , pp. 148-163. 10.1111/1467-9485.00191

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This paper develops a new class of homothetic preferences which generate Marshallian demand curves for individual goods which can be concave, convex or linear in own price under the assumption that agents treat aggregate price indices as given (as in Dixit-Stiglitz, 1977). The preferences are represented by a cost function which has two parameters: one determining the curvature of the Marshallian demand; the other determining the elasticity of demand when all prices are equal. The elasticity of demand varies with relative prices. Illustrative examples are given of Cournot duopoly and exchange rate pass-through.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Publisher: Wiley-Blackwell
ISSN: 0036-9292
Last Modified: 04 Jun 2017 04:24

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