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Comparative Statics and Heterogeneity

Finn Christensen ()

No 2016-01, Working Papers from Towson University, Department of Economics

Abstract: This paper elucidates the role played by the heterogeneity of interactions between the endogenous variables of a model in determining the model's behavior. It is known that comparative statics are well-behaved if these interactions are relatively small, but the formal condition imposed on the Jacobian which typically captures this idea--diagonal dominance--ignores the distribution of the interaction terms. I provide a new condition on the Jacobian--mean positive dominance--which better captures a trade-off between the size and heterogeneity of interaction terms. In accord with Samuelson's (1947) correspondence principle, I also show that mean positive dominance yields stability and uniqueness results. Applications are provided to optimization problems, differentiable games, and competitive exchange economies.

Keywords: comparative statics; heterogeneity; mean positive dominance; correspondence principle; B-matrix; stability; uniqueness; optimization; differentiable games; Cournot oligopoly; general equilibrium. (search for similar items in EconPapers)
JEL-codes: D11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hpe
Date: 2016-01, Revised 2016-10
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