Abstract
Wald (1939) used a pair of linear expansion loci as a basis for deciding the relation between incomes which, at the different prices in two periods, have the same purchasing power. He remarked that the expansion loci, or loci of consumption when prices are fixed, which are associated with a quadratic utility function are linear. This opened the possibility that the two given loci could be associated simultaneously with some quadratic utility. Points on the loci which were indifferent with such a utility would then correspond to incomes which, at the associated prices, had the same purchasing power. Though the utility was not determined, and might not exist, and would not be fully determinate even if it should exist, Wald proved the relation nevertheless to be determinate and he showed a way to calculate it.
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Afriat, S.N. (1978). On Wald’s “New Formula” for the Cost of Living. In: Eichhorn, W., Henn, R., Opitz, O., Shephard, R.W. (eds) Theory and Applications of Economic Indices. Physica, Heidelberg. https://doi.org/10.1007/978-3-662-41486-6_4
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DOI: https://doi.org/10.1007/978-3-662-41486-6_4
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