Economic Theory

, 41:247

Giffen behavior independent of the wealth level

Research Article

Abstract

We demonstrate that a well-behaved utility function can generate Giffen behavior, where “well-behaved” means that its indifference curves are smooth, convex, and closed in a commodity space; the resulting demand function of each good is differentiable with respect to prices and income. Moreover, we show that Giffen behavior is compatible with any level of utility and an arbitrarily low share of income spent on the inferior good. This contrasts sharply with the common view that the Giffen paradox tends to occur when households’ wealth levels are low.

Keywords

Giffen behavior Utility function Standard of living  Expenditure share 

JEL Classification

D01 D11 

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Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.Faculty of EconomicsKansai UniversitySuita, OsakaJapan
  2. 2.Graduate School of EconomicsKobe UniversityKobeJapan
  3. 3.Research Institute for Economics and Business AdministrationKobe UniversityKobeJapan

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