Preference conditions for invertible demand functions

Theodoros Diasakos*, Georgios Gerasimou

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    1 Citation (Scopus)

    Abstract

    It is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the corresponding characterization has remained elusive. We identify necessary and sufficient conditions on a utility-maximizing consumer’s preferences for her demand function to be continuous and invertible: strict convexity, strict monotonicity, and differentiability in the sense of Rubinstein (2006). We further show that Rubinstein differentiability is equivalent to the indifference sets being smooth, which is weaker than Debreu’s (1972) notion of preference smoothness. We finally discuss implications of our analysis for demand functions that satisfy the “strict law of demand.”
    Original languageEnglish
    Pages (from-to)113-138
    JournalAmerican Economic Journal: Microeconomics
    Volume14
    Issue number2
    Early online date26 Apr 2022
    DOIs
    Publication statusPublished - 1 May 2022

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