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A Class of Dynamic Demand Systems

Author

Listed:
  • Tian, Guoqiang
  • Chipman, John S.

Abstract

This paper derives closed-form solutions for the total consumption-expenditure function (i.e. aggregate consumption function), the savings function and the demand functions from a nonstationary intertemporal utility-maximization problem under uncertainty for a class of demand systems, including the linear expenditure system (LES) from the Klein-Rubin-Samuelson (KRS) utility function, the generalized linear expenditure systems (GLES) from the CES and S-branch-tree utility functions, the Almost Ideal Demand System (AIDS) from the PIGLOG class of preferences, and the indirect addilog demand system (IADS). We do so by following Hicks’ and Tintner’s method of maximizing a discounted utility function subject to expected constraints rather than the more fashionable method of maximizing an expected discounted utility function subject to stochastic constraints. Furthermore, the preferences are allowed to vary with the time period. Theoretical analyses for these systems are also given in this paper.

Suggested Citation

  • Tian, Guoqiang & Chipman, John S., 1989. "A Class of Dynamic Demand Systems," MPRA Paper 41387, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41387
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    References listed on IDEAS

    as
    1. Barten, A. P., 1969. "Maximum likelihood estimation of a complete system of demand equations," European Economic Review, Elsevier, vol. 1(1), pages 7-73.
    2. Chipman, John S. & Tian, Guoqiang, 1989. "Stochastic Specification and Maximum-Likelihood Estimation of the Linear Expenditure System," MPRA Paper 41385, University Library of Munich, Germany.
    3. Blackorby, Charles & Boyce, Richard & Russell, R Robert, 1978. "Estimation of Demand Systems Generated by the Gorman Polar Form: A Generalization of the S-Branch Utility Tree," Econometrica, Econometric Society, vol. 46(2), pages 345-363, March.
    4. Brown, Murray & Heien, Dale M, 1972. "The S-Branch Utility Tree: A Generalization of the Linear Expenditure System," Econometrica, Econometric Society, vol. 40(4), pages 737-747, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dynamic Demand Systems;

    JEL classification:

    • D0 - Microeconomics - - General

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