SFB 303 Discussion Paper No. A - 460

Author: Kneip, Alois
Title: Behavioral Heterogeneity and Structural Properties of Aggregate Demand
Abstract: The paper deals with aggregate demand of a large population of households. It is based on an attempt to take aggregation seriously. The approach relies on a distributional property of the population by requiring that demand functions are very different in between households such that households react "heterogeneously" to changes in prices and income. A theoretical framework is developed which does not rely on specific models of individual behavior. Sufficient heterogeneity implies some important structural features of aggregate demand like, for example, the Law of Demand, which cannot be derived from the general microeconomic assumptions on individual rationality. Emphasis lies upon a discussion of the conceptual approach.
Keywords: Aggregation, Behavioral heterogeneity, Law of Demand
JEL-Classification-Number: D11, D12, D30
Creation-Date: May 1995
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