Slutsky substitution matrix is negative semidefinite

E746878

The Slutsky substitution matrix is negative semidefinite is a core result in consumer theory stating that, under standard assumptions, the matrix of compensated price effects has non-positive eigenvalues, reflecting the law of demand in a multigood setting.

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Predicate Object
instanceOf result in microeconomic theory
theorem in consumer theory
appliesTo finite-dimensional commodity spaces
assumes convex preferences
differentiable utility or demand functions
locally non-satiated preferences
standard consumer theory assumptions
concerns Hicksian demand functions
linked to: Hicksian demand

Slutsky substitution matrix
compensated price effects
connectedTo Afriat–Varian revealed preference conditions in differential form
contrastsWith positive semidefinite matrices in production theory
describes curvature property of the expenditure function
equivalentTo Hicksian demand satisfies the law of compensated demand
linked to: Hicksian demand

expenditure function is concave in prices
field consumer theory
microeconomics
guarantees consistency of observed Hicksian demand with utility maximization
historicalOrigin work of Eugen Slutsky on demand theory
holdsUnder interior solutions to the consumer problem
well-behaved preferences
implies eigenvalues of the Slutsky substitution matrix are non-positive
for any price change vector the associated quadratic form is non-positive
law of demand in a multigood setting
own-price compensated effects are non-positive
substitution terms cannot generate positive quadratic forms
isPropertyOf matrix of partial derivatives of Hicksian demand with respect to prices
isSpecialCaseOf curvature restrictions in applied demand analysis
logicalStatus necessary condition for rationalizable Hicksian demand
not sufficient alone for full integrability
mathematicalForm Slutsky matrix is symmetric and negative semidefinite
motivates imposition of curvature constraints in econometric models of demand
refersTo negative semidefiniteness of the Slutsky substitution matrix
relatedTo Hicksian substitution effect
linked to: Hicksian demand

Marshallian demand functions
linked to: Marshallian demand

Slutsky equation
integrability conditions for demand
requires twice differentiable expenditure function
testedIn empirical demand system estimation
usedIn comparative statics of consumer demand
duality theory in microeconomics
welfare analysis

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Hicksian demand implies Slutsky substitution matrix is negative semidefinite
Slutsky substitution matrix is negative semidefinite concerns Slutsky substitution matrix
linked to: Slutsky substitution matrix is negative semidefinite
Slutsky substitution matrix is negative semidefinite mathematicalForm Slutsky matrix is symmetric and negative semidefinite
linked to: Slutsky substitution matrix is negative semidefinite
Eugen Slutsky hasConceptNamedAfter Slutsky matrix
linked to: Slutsky substitution matrix is negative semidefinite