On Shephard's lemma and the continuity of compensated demand functions (Q5966246): Difference between revisions

From the authors introduction: ''Conditions implying the validity of Shephard's lemma are reconsidered. In a former paper [Ann. Oper. Res. 23, 299-310 (1990; Zbl 0715.90007)] we have imposed mild conditions on the preference relation of the individual, which already imply Shephard's lemma. Especially in Theorem 2 in above cited paper, it was shown that we neither need completeness or transitivity of the underlying preferences, nor differentiability of the cost function. Therefore, this theorem will also hold in a theory on competitive markets where it is not required that the individuals have complete and transitive preferences, for instance, in the exchange economy established by Mas-Colell (1974). In this paper the author demonstrates that one can even weaken the hypotheses assumed in the mentioned Theorem 2, deleting the assumption that the compensated demand function is continuous with respect to prices \(p\). It can even be shown that this property is redundant. Therefore, the author is sure now that Shephard's lemma already follows from very weak assumptions on the preferences of the individual.''