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New Developments in Aggregation Economics

Author

Listed:
  • Pierre André Chiappori

    (Department of Economics, Columbia University, New York, New York 10027)

  • Ivar Ekeland

    (Department of Mathematics, University of British Columbia, Vancouver, British Columbia, Canada V6T 1Z2)

Abstract

The goal of this article is to provide a general characterization of the aggregate behavior of a group in a market environment. We allow for public and private consumption, intragroup production, and consumption externalities within a group; we only assume that the group always reaches Pareto-efficient decisions. We show that aggregation problems involve a simple mathematical structure: The aggregate demand of the group, considered as a vector field, can be decomposed into a sum of gradients. We briefly introduce exterior differential calculus as a tool to study this structure. We analyze two main issues. One is testability: What restrictions (if any) on the aggregate demand function characterize the efficient behavior of the group? The second issue relates to identifiability; we investigate the conditions under which it is possible to recover the underlying structure—namely, individual preferences, the decision process, and the resulting intragroup transfers—from the group's aggregate behavior.

Suggested Citation

  • Pierre André Chiappori & Ivar Ekeland, 2011. "New Developments in Aggregation Economics," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 631-668, September.
    • Handle: RePEc:anr:reveco:v:3:y:2011:p:631-668
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-072610-104803
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    Citations

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    Cited by:

    1. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    2. Basu, Anirban, 2020. "A welfare-theoretic model consistent with the practice of cost-effectiveness analysis and its implications," Journal of Health Economics, Elsevier, vol. 70(C).
    3. Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2015. "Revealed Preference and Aggregation," Working Papers ECARES ECARES 2015-08, ULB -- Universite Libre de Bruxelles.

    More about this item

    Keywords

    household behavior; family economics; aggregate demand;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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