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Distributional comparative statics with heterogeneous agents

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  • Andreas Hefti

Abstract

We propose a formal way to systematically study the differential effects of exogenous shocks in economic models with heterogeneous agents. Our setting applies to models that can be rephrased as "competition for market shares" in a broad sense. We show that even in presence of any number of arbitrarily heterogeneous agents, a single recursion relation characterizes the distributional pattern of equilibrium market shares and related measures. We identify the general conditions under which the market share function rotates, thereby either causing more or less equality among the agents. Our setting highlights the exceptional rule that power functions play for the distributional effects. We apply our method across economic models, including examples from monopolistic competition, discrete choice, partial and general equilibrium theory and contest theory.

Suggested Citation

  • Andreas Hefti, 2016. "Distributional comparative statics with heterogeneous agents," ECON - Working Papers 237, Department of Economics - University of Zurich.
    • Handle: RePEc:zur:econwp:237
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Heterogeneity; inequality; monopolistic competition; general equilibrium; contest theory;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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