The effect of aggregation on the magnitude of behavioral heterogeneity
Recent literature has shown that the magnitude of behavioral heterogeneity of a population has an impact on the structure of mean demand. This paper investigates the effect of aggregation on the magnitude of behavioral heterogeneity if we aggregate disjoint subpopulations. Using the Hildenbrand and Kneip (1999) framework of behavioral heterogeneity, we show: (i) aggregation cannot decrease the degree of behavioral heterogeneity (ii) conditions under which aggregation increases the degree of behavioral heterogeneity are derived (iii) aggregation weakly increases the degree of behavioral heterogeneity.
Volume (Year): 4 (2003)
Issue (Month): 25 ()
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- Kneip, Alois, 1999. "Behavioral heterogeneity and structural properties of aggregate demand," Journal of Mathematical Economics, Elsevier, vol. 31(1), pages 49-79, February.
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