# SFB 303 Discussion Paper No. A - 483

**Author**: Maret, Isabelle

**Title**: Joint Distribution of Demand Functions and Price Expectation Functions,
and Structural Properties of Market Demand

**Abstract**: Structural Properties of the demand of a large population introduced by
the aggregation process are studied. The idea is to consider assumptions on
the distribution of household characteristics rather than focusing on the
modelling of individual behavior. By opposite to the existing literature
where the Law of Demand is deduced from distributional requirements, the
expectation about future prices are explicitely introduced in the household
decision rule. Hence, heterogeneity of household behavior can be interpreted
as reflecting heterogeneity in tastes and risk aversion which generates the
distribution of demand functions and heterogeneity of the expectation rules
which generates the distribution of expectation functions. It is proved that
the introduction of assumptions on the distribution of these expectations
rules (in addition to reasonable assumptions on the distribution of demand
functions) allow to give an account of the Law of Demand, independently of
strong restrictions on the Jacobian matrix of market demand.

**Keywords**: Distribution of Household Characteristics, Multi-period Decision
Program, Expectation Rule, Demand Aggregation, Slutsky Substitution Effect,
Income Effect, Intertemporal Effect, Law of Demand

**JEL-Classification-Number**: D11, D30, D41, D91

**Creation-Date**: February 1995

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