Abstract
This paper investigates the duality relationships between Marshallian and compensated price-dependent consumer demands. We associate the compensated price-dependent demand with Luenberger’s benefit function, which has nice aggregation properties and provides a general basis for conducting welfare analysis. As an analog to the well-known “Slutsky equation,” we derive a “Luenberger equation” establishing the general relationships between Marshallian and compensated price-dependent slopes. Our duality results strengthen the conceptual linkages between positive economic analysis and welfare analysis.
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Michele Baggio was research assistant at the Department of Economics, University of Verona, Verona, Italy, when this article was written.
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Chavas, JP., Baggio, M. On duality and the benefit function. J Econ 99, 173–184 (2010). https://doi.org/10.1007/s00712-009-0101-z
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DOI: https://doi.org/10.1007/s00712-009-0101-z