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A Note on Consumer Surplus and the Structure of Preferences

Author

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  • Paolo Bertoletti

    (Department of Economics and Management, University of Pavia)

Abstract

We represent quasi-linear preferences by the dual measure of consumer surplus, and investigate demand and the associated multiproduct pricing. In particular, we discuss the role of substitutability "within group" and with the outside commodity, deriving a Slutsky-like decomposition of the price effect. We use our results to show that Ramsey prices are proportional to marginal costs only if preferences are fully homothetic, and that commodities with larger outside substitutability have smaller Lerner indexes.

Suggested Citation

  • Paolo Bertoletti, 2016. "A Note on Consumer Surplus and the Structure of Preferences," DEM Working Papers Series 130, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0130
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    File URL: http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0130.pdf
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    References listed on IDEAS

    as
    1. Paolo Bertoletti & Federico Etro, 2022. "Monopolistic competition, as you like it," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 293-319, January.
    2. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (II): Applications of the Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 2, number fuss1978a.
    3. Bertoletti, Paolo & Epifani, Paolo, 2014. "Monopolistic competition: CES redux?," Journal of International Economics, Elsevier, vol. 93(2), pages 227-238.
    4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, November.
    5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    6. Angus Deaton, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 391-405.
    7. Lau, Lawrence J., 1969. "Duality and the structure of utility functions," Journal of Economic Theory, Elsevier, vol. 1(4), pages 374-396, December.
    8. Paolo Bertoletti, 2005. "Elasticities of Substitution and Complementarity: A Synthesis," Journal of Productivity Analysis, Springer, vol. 24(2), pages 183-196, October.
    9. Deaton, Angus, 1974. "A Reconsideration of the Empirical Implications of Additive Preferences," Economic Journal, Royal Economic Society, vol. 84(334), pages 338-348, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Quasi-Linear Preferences; Homotheticity; Ramsey Pricing;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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