Consumers’ surplus when individuals lack integrated preferences: A development of some ideas from Dupuit

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Abstract

In modern economics, consumers’ surplus is understood as the sum of individuals’ compensating variations, defined by reference to well-behaved preferences. If individuals lack integrated preferences, as behavioural economics suggests they often do, consumers’ surplus cannot be defined. However, Dupuit – the earliest theorist of consumers’ surplus – did not assume integrated preferences. His concept of consumers’ surplus can be interpreted in terms of the maximum yield of discriminatory prices. In principle, this can be measured without making assumptions about preferences, but (contrary to what Dupuit apparently thought) is not in general equal to the area under the observed demand curve.
Original languageEnglish
Pages (from-to)1042-1063
Number of pages22
JournalEuropean Journal of the History of Economic Thought
Volume22
Issue number6
Early online date25 Sep 2015
DOIs
Publication statusPublished - 2015

Keywords

  • consumers' surplus
  • price discrimination
  • integrated preferences
  • Dupuit

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