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Comparative Statics and Heterogeneity

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  • Finn Christensen

    (Department of Economics, Towson University)

Abstract

This paper elucidates the role played by the heterogeneity of interactions between the endogenous variables of a model in determining the model's behavior. It is known that comparative statics are well-behaved if these interactions are relatively small, but the formal condition imposed on the Jacobian which typically captures this idea--diagonal dominance--ignores the distribution of the interaction terms. I provide a new condition on the Jacobian--mean positive dominance--which better captures a trade-off between the size and heterogeneity of interaction terms. In accord with Samuelson's (1947) correspondence principle, I also show that mean positive dominance yields stability and uniqueness results. Applications are provided to optimization problems, differentiable games, and competitive exchange economies.

Suggested Citation

  • Finn Christensen, 2016. "Comparative Statics and Heterogeneity," Working Papers 2016-01, Towson University, Department of Economics, revised Oct 2016.
  • Handle: RePEc:tow:wpaper:2016-01
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    Cited by:

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    More about this item

    Keywords

    comparative statics; heterogeneity; mean positive dominance; correspondence principle; B-matrix; stability; uniqueness; optimization; differentiable games; Cournot oligopoly; general equilibrium.;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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