Corrado
Benassi
,
Alessandra
Chirco
|
Full Version (PDF)
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In The Economics of Imperfect Competition, Joan Robinson argued that an increase of the consumers' incomes should make demand less elastic - which, though reasonable about individual demand as an assumption on preferences, suggests a role for income distribution as far as market demand is concerned. We model increases in aggregate income as first-order stochastic dominance shifts of the income distribution, and use Esteban's (1986) income share elasticity to provide sufficient conditions on income distribution that support the `Robinson effect' - i.e., such that a negative (positive) relationship between indivual income and price elasticity translates into a negative (positive) relationship between mean income and market demand elasticity. The paper also provides a framework to study the effects of distributive shocks on the price elasticity of market demand.
Table of Contents
Introduction |
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Corrado
Benassi
,
Alessandra
Chirco
|
2-3 |
Income distribution and demand elasticity |
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Corrado
Benassi
,
Alessandra
Chirco
|
3-6 |
First order stochastic dominance |
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Corrado
Benassi
,
Alessandra
Chirco
|
6-10 |
Concluding remarks |
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Corrado
Benassi
,
Alessandra
Chirco
|
10-10 |
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