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On behavioral complementarity and its implications

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  • Chambers, Christopher P.
  • Echenique, Federico
  • Shmaya, Eran

Abstract

We study the behavioral definition of complementary goods: if the price of one good increases, demand for a complementary good must decrease. We obtain its full implications for observable demand behavior (its testable implications), and for the consumer's underlying preferences. We characterize those data sets which can be generated by rational preferences exhibiting complementarities. The class of preferences that generate demand complements has Leontief and Cobb-Douglas as its as extreme members.
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Suggested Citation

  • Chambers, Christopher P. & Echenique, Federico & Shmaya, Eran, 2007. "On behavioral complementarity and its implications," Working Papers 1270, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Handle: RePEc:clt:sswopa:1270
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    File URL: http://www.hss.caltech.edu/SSPapers/sswp1270.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jean-Pierre H. Dubé, 2018. "Microeconometric Models of Consumer Demand," NBER Working Papers 25215, National Bureau of Economic Research, Inc.
    2. Paola Manzini & Marco Mariotti & Levent Ülkü, 2019. "Stochastic Complementarity," The Economic Journal, Royal Economic Society, vol. 129(619), pages 1343-1363.
    3. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram, 2018. "Normality of demand in a two-goods setting," Journal of Economic Theory, Elsevier, vol. 173(C), pages 361-382.
    4. Demuynck, Thomas & Hjertstrand, Per, 2019. "Samuelson's Approach to Revealed Preference Theory: Some Recent Advances," Working Paper Series 1274, Research Institute of Industrial Economics.
    5. Edward E. Schlee & M. Ali Khan, 2022. "Money Metrics In Applied Welfare Analysis: A Saddlepoint Rehabilitation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 189-210, February.
    6. Iaria, Alessandro & ,, 2020. "Inferring Complementarity from Correlations rather than Structural Estimation," CEPR Discussion Papers 14273, C.E.P.R. Discussion Papers.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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