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The Exact Insensitivity of Market Budget Shares and the 'Balancing Effect'

  • Gaël GIRAUD
  • Isabelle MARET

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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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2005-02.

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Date of creation: 2005
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Handle: RePEc:ulp:sbbeta:2005-02
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  1. Jerison, Michael, 1999. "Dispersed excess demands, the weak axiom and uniqueness of equilibrium," Journal of Mathematical Economics, Elsevier, vol. 31(1), pages 15-48, February.
  2. Werner Hildenbrand & Alois Kneip, 1999. "Behavioral Heterogeneity," Discussion Paper Serie A 589, University of Bonn, Germany.
  3. Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
  4. Maret, Isabelle, 1998. "Heterogeneous households}} intertemporal characteristics and the aggregation problem," Research in Economics, Elsevier, vol. 52(2), pages 133-157, June.
  5. 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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