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.
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