Price Effects in the Short and in the Long Run

Dragone, Davide ; Vanin, Paolo (2015) Price Effects in the Short and in the Long Run. Bologna: Dipartimento di Scienze economiche DSE, p. 49. DOI 10.6092/unibo/amsacta/4408. In: Quaderni - Working Paper DSE (1040). ISSN 2282-6483.
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Abstract

We study a broad class of dynamic consumer problems and characterize the short and long-run response of the demand for a good to a permanent increase in its market price. Such response can be non-monotonic over time, and the short and long-run price-elasticity of demand may have opposite sign. This is a testable prediction and can arise even in the absence of income effects. Our results are robust to a variety of settings that are commonly used in the economic literature, and have relevant policy implications. We provide illustrative applications to models of human capital and labor supply, addiction, habit and taste formation, health capital, and renewable resources.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Dragone, Davide
Vanin, Paolo
Keywords
Price elasticity, Non-monotonicity, Price-based policies
Subjects
ISSN
2282-6483
DOI
Deposit date
30 Nov 2015 08:07
Last modified
07 Jun 2017 08:06
URI

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