Working Paper

Preference Conditions for Invertible Demand Functions



Diasakos TM & Gerasimou G (2020) Preference Conditions for Invertible Demand Functions. School of Economics and Finance Discussion Papers, 1708.

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".

Title of seriesSchool of Economics and Finance Discussion Papers
Number in series1708
Publication date20/08/2020
Publisher URL
ISSN of series2055-303X