A well-behaved utility function can generate Giffen behavior


We present a specific utility function which generates Giffen behavior. The derived demand function of each good is not only continuous in its price and income but also partly increasing in its price and decreasing in income. Moreover, we show that Giffen behavior is compatible with arbitrary level of utility; thus the standard "margarine-butter paradigm" may not adequately explain Giffen's paradox.

Junko DOI
Kansai University/Kyoto Sangyo University

Kazumichi IWASA
Kobe University

Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
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