Despite the theory, it's difficult to identify a real-world case of a Giffen good
Robson, 1981, Insurance as a Giffen Good
, Economics Letters, 8: 47-51.
However, an individual with DARA might treat insurance as a Giffen good
(3) when the income effect exceeds the substitution effect.
Let a consumer consume two goods and let Good 1 be a Giffen good
12 Katyal's insightful account of how the phenomenon of substitution can confound conventional deterrence prescriptions employs a host of innovative concepts -- including Giffen goods
, income effects, and extremeness aversion -- that the new deterrence scholarship should aspire to appropriate.
On the one hand, Boland's tone would lead us to conclude that he is arguing on a priori grounds against the existence of Giffen goods
and feels that this is a legitimate method of argument.
Facing this difficulty, Briys, Dionne, and Eeckhoudt (1989) have only attempted to reinvestigate Hoy and Robson's (1981) result for insurance to be a Giffen good
under the special case of a two-state risk.
Furthermore, each good with a downward-sloping demand curve must have at least one gross substitute and each Giffen good
- if there are any - must have at least one gross complement.
First, if the consumer is subject to a single constraint, as he is in Hicksian utility theory, it is indeed true that an upward-sloping demand curve characterizes a Giffen good
Hoy, Michael and Arthur Robson, "Insurance as a Giffen Good
Experimental Confirmation of the Existence of a Giffen Good
Contrary to the well-known result obtained in the standard static model, insurance may not be a Giffen good
in the sense that a transitory increase in the loading factor of insurance always reduces the demand for insurance in the short run, under risk aversion alone.