New Developments in Aggregation Economics

Pierre Chiappori and Ivar Ekeland
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Ivar Ekeland: Department of Mathematics, University of British Columbia, Vancouver, British Columbia, Canada V6T 1Z2

Annual Review of Economics, 2011, vol. 3, issue 1, 631-668

Abstract: The goal of this article is to provide a general characterization of the aggregate behavior of a group in a market environment. We allow for public and private consumption, intragroup production, and consumption externalities within a group; we only assume that the group always reaches Pareto-efficient decisions. We show that aggregation problems involve a simple mathematical structure: The aggregate demand of the group, considered as a vector field, can be decomposed into a sum of gradients. We briefly introduce exterior differential calculus as a tool to study this structure. We analyze two main issues. One is testability: What restrictions (if any) on the aggregate demand function characterize the efficient behavior of the group? The second issue relates to identifiability; we investigate the conditions under which it is possible to recover the underlying structure—namely, individual preferences, the decision process, and the resulting intragroup transfers—from the group's aggregate behavior.

Keywords: household behavior; family economics; aggregate demand (search for similar items in EconPapers)
JEL-codes: D10 D11 D70 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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