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Heterotic Models of Aggregate Demand

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  • Gael Giraud

    () (CNRS, France)

  • John Quah

    () (St Hugh's College, Oxford University, Oxford)

Abstract

A common theme in the theory of demand aggregation is that market demand can acquire properties which are not always individually present among the agents who make up that market, a phenomenon we call heterosis in this paper. This paper focusses on the well known result that with a suitable distribution of demand behavior (arising perhaps from the underlying distribution of preferences), market demand can become approximately a linear function of income or even taken an approximate Cobb-Douglas properties. We highlight the mathematical arguments underpinning these models and show that in the right context, it is possible to carry the arguments further and achieve exact rather than just approximate results: exact Cobb-Douglas market demand or exact linearity of market demand with respect to income.

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File URL: http://www.nuff.ox.ac.uk/economics/papers/2002/w18/hlp12.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2002-W18.

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Length: 25 pages
Date of creation: 01 Jul 2002
Date of revision:
Handle: RePEc:nuf:econwp:0218

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: heterosis; heterogeneity; Cobb-Douglas; homotheticity; law of demand; aggregation;

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  1. Michael Jerison, 1998. "Dispersed Excess Demands, the Weak Axiom and Uniqueness of Equilibrium," Discussion Papers 98-03, University at Albany, SUNY, Department of Economics.
  2. Gael Giraud & Isabelle Maret, 2001. "Behavioral Heterogeneity in Large Economies," Working Papers of BETA 2001-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. John Quah, 2001. "Demand is heterogenous in grandmonts model," Economics Papers 2001-W12, Economics Group, Nuffield College, University of Oxford.
  4. John K.-H. Quah, 1997. "The Law of Demand when Income Is Price Dependent," Econometrica, Econometric Society, vol. 65(6), pages 1421-1442, November.
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