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Behavioral Heterogeneity and the Law of Demand

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  • Ralf Wilke

Abstract

Consider an economy in which households differ in behavior and disposable income: (i) we derive conditions on the joint distribution of both characteristics such that the Law of Demand holds for aggregate demand. We obtain that the poorer the household the less its behavior affects the structure of aggregate demand. (ii) we introduce a new concept of behavioral differences. By construction, it is not subject to recent criticism on existing concepts of behavioral heterogeneity (Grandmont, 1992, Kneip, 1999, Hildenbrand and Kneip, 1999). (iii) We introduce the degree of behavioral differences which improves a poor property of the coefficient of sensitivity and of the degree of behavioral heterogeneity. (This version: May, 2002)

Suggested Citation

  • Ralf Wilke, 2001. "Behavioral Heterogeneity and the Law of Demand," Discussion Papers in Economics 01_08, University of Dortmund, Department of Economics.
    • Handle: RePEc:mik:wpaper:01_08
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