In Search of Giffen Behavior

This paper develops a theory of Giffen behavior that results from a second rationing constraint. In contrast to standard analysis, this approach is virtually independent of the specific form of consumer preferences. The effect is first developed in a two‐good world along with an example, then extended to a more general case to determine if the effect vanishes as the choice set is expanded. The results demonstrate that Giffen behavior is plausible when a second rationing constraint applies and, furthermore, adding additional goods to the choice set does not necessarily cause the effect to vanish.