Heterotic Models of Aggregate Demand
AbstractA 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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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2002-W18.
Date of creation: 01 Jul 2002
Date of revision:
heterosis; heterogeneity; Cobb-Douglas; homotheticity; law of demand; aggregation;
Other versions of this item:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
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98-03, University at Albany, SUNY, Department of Economics.
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- Gael Giraud & Isabelle Maret, 2001.
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2001-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- 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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