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A Definition of Luxury and Necessity for Cardinal Utility Functions

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  • Besley, Timothy J

Abstract

This note proposes a definition of luxury and necessity that is useful when utility functions are cardinal. The author offers an exposition using the profit function representation of preferences and also gives some motivation. Applications are found in the theory of the consumer in an intertemporal setting, commodity price stabilization theory, and a consumer's decision to hedge in a futures market. Copyright 1989 by Royal Economic Society.

Suggested Citation

  • Besley, Timothy J, 1989. "A Definition of Luxury and Necessity for Cardinal Utility Functions," Economic Journal, Royal Economic Society, vol. 99(397), pages 844-849, September.
    • Handle: RePEc:ecj:econjl:v:99:y:1989:i:397:p:844-49
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    Cited by:

    1. Shinsuke Ikeda, 2006. "Luxury And Wealth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 495-526, May.
    2. Simon GB Cowan & Simon Cowan, 2002. "Marginal Cost Pricing versus Insurance," Economics Series Working Papers 102, University of Oxford, Department of Economics.
    3. Simon Cowan, 2004. "Utility Regulation and Risk Allocation: The Roles of Marginal Cost Pricing and Futures Markets," Journal of Regulatory Economics, Springer, vol. 26(1), pages 23-40, July.
    4. Ikeda, S., 2001. "Luxury and Wealth Accumulation," ISER Discussion Paper 0528, Institute of Social and Economic Research, Osaka University.
    5. Finkelshtain, Israel & Chalfant, James, 1990. "Marketed Surplus Under Risk: Do Peasants Agree with Sandmo?," CUDARE Working Papers 198573, University of California, Berkeley, Department of Agricultural and Resource Economics.
    6. Sproule, Robert, 2013. "A systematic analysis of the links amongst the Marshallian, Hicksian, and Frischian demand functions: A note," Economics Letters, Elsevier, vol. 121(3), pages 555-557.
    7. Raluca CIORNEA & Marius D. POP & Mihai F. BACILA & Alexandra M. DRULE TIRCA, 2012. "Was Luxury Little Researched? An Exploration Of Studies And Research Trends In The Area Of Marketing Of Luxury Goods, Before 2005," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(2), pages 325-340, November.

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