Joint Distribution of Demand Functions and Price Expectation Functions, and Structural Properties of Market Demand
AbstractStructural Properties of the demand of a large population introduced by the aggregation process are studied. The idea is to consider assumptions on the distribution of household characteristics rather than focusing on the modelling of individual behavior. By opposite to the existing literature where the Law of Demand is deduced from distributional requirements, the expectation about future prices are explicitely introduced in the household decision rule. Hence, heterogeneity of household behavior can be interpreted as reflecting heterogeneity in tastes and risk aversion which generates the distribution of demand functions and heterogeneity of the expectation rules which generates the distribution of expectation functions. It is proved that the introduction of assumptions on the distribution of these expectations rules (in addition to reasonable assumptions on the distribution of demand functions) allow to give an account of the Law of Demand, independently of strong restrictions on the Jacobian matrix of market demand.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 483.
Length: 37 pages
Date of creation: Feb 1995
Date of revision:
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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
Distribution of Household Characteristics; Multi-period Decision Program; Expectation Rule; Demand Aggregation; Slutsky Substitution Effect; Income Effect; Intertemporal Effect; Law of Demand;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
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- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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