Nonrepresentative representative consumers

Michael Jerison

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Representative consumers can be very Pareto inconsistent. We describe a cornmunity, with equal income distribution, where all consumers require 56 % higher aggregate income than the representative consumer requires in order to be compensated for the doubling of a price. Such large inconsistencies are ruled out if the representative consumer is homothetic, or if the consumers' income shares are fixed and all goods are normal. We show that optimality of the income distribution rule is not necessary for Pareto consistency of the representative consumer, and we give a weaker sufficient condition for Pareto consistency in cornmunities with two goods and two consumers.

Keywords: Representative; consumer; Optimal; income; distribution; rule; Increasing; dispersion; Pareto; inconsistency (search for similar items in EconPapers)
Date: 1997-10
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Related works:
Working Paper: Nonrepresentative Representative Consumers (2006)
Working Paper: Nonrepresentative Representative Consumers (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:4137

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