Not so Demanding: Preference Structure, Firm Behavior, and Welfare∗
نویسندگان
چکیده
We introduce a new perspective on how assumptions about preferences and demand affect firm behavior and economic performance. Our key innovation is the “Demand Manifold,” which links the elasticity and convexity of an arbitrary demand function. We show that it is a sufficient statistic for many comparative statics questions, leads naturally to some new families of demand functions, and relates demand structure to the behavior of monopoly firms and monopolistically competitive industries. Finally, we show how our approach can be extended to understand variable pass-through and to develop a quantitative framework for measuring the welfare effects of globalization.
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