Heterotic Models of Aggregate Demand

Gaël Giraud and John Quah

No 2002-W18, Economics Papers from Economics Group, Nuffield College, University of Oxford

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 that market, a phenomenon we call heterosis in this paper. This paper focusses on the well known result that with 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 taken an 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 (search for similar items in EconPapers)
JEL-codes: D11 D50 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2002-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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