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The exact insensitivity of market budget shares and the "balancing effect"

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Author Info
Gaël Giraud () (Centre d'Economie de la Sorbonne)
Isabelle Maret () (BETA, Université Louis Pasteur)
Abstract

We reformulate Grandmont's and its successors' notion of behavioral heterogeneity such as to get the exact insensitivity of the aggregate budget share function with respect to changes in prices and income, instead of a mere approximate insensitivity. We propose a non parametric set-up such that, if the population is distributed according to some "uniform" probability measure, the aggregate budget share function is constant. The important contribution is that this exact insensitivity is not explained by any insensitivity at the microeconomic level but rather by an exact "balancing effect". We give illustrative examples of populations that fulfill our requirements.

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Publisher Info
Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number b07023.

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Length: 24 pages
Date of creation: Jan 2007
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Handle: RePEc:mse:cesdoc:b07023

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Web page: http://ces.univ-paris1.fr/
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Related research
Keywords: Aggregation of demand; behavioral heterogeneity; balancing effect; large economy; law of demand.;

Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D30 - Microeconomics - - Distribution - - - General
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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