Definition in Terms of Preferences
Quasilinearity can also be defined as a property of preferences directly; is quasilinear if (1) if then, where and is a real number. The two definitions are equivalent in the case of a convex consumption set with continuous preferences that are locally non-satiated in the first argument.
Informally, an agent has quasilinear utility if it can express all its preferences in terms of money and the amount of money it has will not create a wealth effect. As a practical matter in mechanism design, quasilinear utility ensures that agents can compensate each other with side payments. In regards to surplus, quasilinear preferences entail that Marshallian surplus will equal Hicksian surplus since there would be no wealth effect for a change in price.
Read more about this topic: Quasilinear Utility
Famous quotes containing the words definition, terms and/or preferences:
“I’m beginning to think that the proper definition of “Man” is “an animal that writes letters.””
—Lewis Carroll [Charles Lutwidge Dodgson] (1832–1898)
“Most critical writing is drivel and half of it is dishonest.... It is a short cut to oblivion, anyway. Thinking in terms of ideas destroys the power to think in terms of emotions and sensations.”
—Raymond Chandler (1888–1959)
“This is the great truth life has to teach us ... that gratification of our individual desires and expression of our personal preferences without consideration for their effect upon others brings in the end nothing but ruin and devastation.”
—Hortense Odlum (1892–?)