Single Peakedness and Giffen Demand

• Main Author: LANDI, Massimiliano
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Giffen behavior; Utility function; Single peakedness; Expenditure share; Economic Theory
• Online Access: https://ink.library.smu.edu.sg/soe_research/1324; https://ink.library.smu.edu.sg/context/soe_research/article/2323/viewcontent/Giffeng_refv3.pdf
• Institution: Singapore Management University

I provide a simple example of a single peaked utility function that generates a Giffen demand. The utility function is smooth, non piecewise defined, strictly concave but not globally increasing. A full characterization of the parameter conditions under which the Giffen demand arises is provided. In addition the properties of the demand function are studied: I find that the inferior commodity with a Giffen demand must be cheaper relatively to a substitute and that Giffen demand arises at relatively low levels of income. However it is not required that the share of income spent on that commodity be large.