Gross substitutes explained

The term gross substitutes is used in two slightly different meanings:

1. In microeconomics, two commodities

X and Y are called gross substitutes, if (\Delta demand (X))/(\Delta price (Y)) > 0 . I.e., an increase in the price of one commodity causes people to want strictly more of the other commodity, since the commodities can substitute each other (bus and taxi are a common example).

1. In auction theory and competitive equilibrium theory, a valuation function is said to have the gross substitutes (GS) property if for all pairs of commodities:

(\Delta demand (X))/(\Delta price (Y)) \geq 0 . I.e., the definition includes both substitute goods and independent goods, and only rules out complementary goods. See Gross substitutes (indivisible items)