Heterotic Models of Aggregate Demand

25 Pages Posted: 20 Jul 2002

See all articles by Gael Giraud

Gael Giraud

University of Angers - Bureau of Economic Theory and Application (BETA)

John Kim-Ho Quah

University of Oxford - Department of Economics

Abstract

A common theme in the theory of demand aggregation is that market demand can acquire properties which are not always individually present among the agents who make up the market, a phenomenon called it heterosis in this paper. This paper focusses on the well-known result that a suitable distribution of demand behavior (arising perhaps from the underlying distribution of preferences), market demand can become approximately a linear function of income or even take on approximate Cobb-Douglas properties. We highlight the mathematical arguments underpinning these models and show that in the right context, it is possible to carry the arguments further and achieve exact rather than just approximate results: exact Cobb-Douglas market demand or exact linearity of market demand with respect to income.

Keywords: Heterosis, heterogeneity, Cobb-Douglas, homotheticity, law of demand, aggregation

JEL Classification: D11, D50

Suggested Citation

Giraud, Gael and Quah, John Kim-Ho, Heterotic Models of Aggregate Demand. Available at SSRN: https://ssrn.com/abstract=317280 or http://dx.doi.org/10.2139/ssrn.317280

Gael Giraud (Contact Author)

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

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Strasbourg, 67000
France
+33 3 90 24 21 90 (Phone)

John Kim-Ho Quah

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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