Measuring price-dependent preferences in the Federal Republic of Germany

Abstract

Beginning with Veblen's seminal work in 1899, many economists have questioned the appropriateness of assuming that preferences are fixed. In this paper we examine the West German economy to see if we can find Veblen effects by using a technique to detect the dependence of preferences on prices and income in a generalized Fechner-Thurstone direct utility function framework. The data are for five commodity groups and the 1950–1984 period. We found evidence of price and income dependent preference variation for most goods. The robustness of our results based on aggregate data, however, is unknown until individual consumption data becomes available.