COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

Lux et veritas

COWLES FOUNDATION DISCUSSION PAPER NO. 1399R

Rationalizing and Curve-Fitting Demand Data with Quasilinear Utilities

Donald J. Brown and Caterina Calsamiglia

Revised July 2004

In the empirical and theoretical literature a consumer's utility function is often assumed to be quasilinear. In this paper we provide necessary and sufficient conditions for testing if the consumer acts as if she is maximizing a quasilinear utility function over her budget set. If the consumer's choices are inconsistent with maximizing a quasilinear utility function over her budget set, then we compute the "best" quasilinear rationalization of her choices.

Keywords: Quasilinear utilities, Afriat inequalities, Curve-fitting

JEL Classification: D11, D12

Original Title: "The Strong Law of Demand"