| Bipasa Datta, University of York |
| Linear-Homothetic Preferences |
| Session: C-12-3 Wednesday 16 August 2000 by Datta, Bipasa |
| This paper develops a new class of linear homothetic (LH) preferences that result in Marshallian demands that are linear in price under the assumption that agents take aggregate price indeces as given (as in monopolistic competition). The preferences are represented by a cost-function that has one parameter, which can be interpreted as the elasticity of demand when all prices are equal. The cost-function has a restricted form that allows the elasticity of demand to be compatible with any number of commodities. We also allow for a more general class of omega-homothetic preferences that has the LH as a special case. |