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Hicksian complementarity and perturbed utility models

Author

Listed:
  • Roy Allen

    (University of Western Ontario)

  • John Rehbeck

    (The Ohio State University)

Abstract

This paper studies aggregate complementarity without price or income variation. We show that for a class of utility functions, variation in non-price observables allows one to recover a measure of complementarity similar to Hicksian complementarity. In addition, the entire Slutsky matrix can be recovered up to scale without price variation. We then examine aggregate complementarity in latent utility models used in discrete choice, bundles, and matching. We show that classical linear instrumental variables can recover Hicksian complementarity for the special case of quadratic utility.

Suggested Citation

  • Roy Allen & John Rehbeck, 2020. "Hicksian complementarity and perturbed utility models," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 245-261, October.
    • Handle: RePEc:spr:etbull:v:8:y:2020:i:2:d:10.1007_s40505-019-00180-6
    DOI: 10.1007/s40505-019-00180-6
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    More about this item

    Keywords

    Hicksian complementarity; Demand; Instrumental variables;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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