Title: On the Empirical Evidence of Microeconomic Demand Theory
Abstract: The concept of `market demand' plays a fundamental role in economic analysis, for example in price theory under perfect or oligopolistic competition. In each particular theory one defines an equilibrium concept. If one wants to use such a model for a comparative static analysis then the equilibrium concept should be well determined. In order to obtain a well determined equilibrium it is essential that the market demand has certain properties. The most traditional property of market demand is the so-called `Law of Demand' or to use a more neutral term, the monotonicity of market demand. The hypothesis of a monotone market demand function or certain consequences of this hypothesis have to be, at least in principal, falsifiable by empirical data, and it is important whether this hypothesis passes such a test. In this paper I shall formulate an hypothesis on the distribution of households' characteristics which is not falsified by empirical data and I shall show that this hypothesis has an important consequence for the theory of market demand.
Creation-Date: 28. Juli 1993
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