Working Paper BETA #2002-04

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Title : Behavioral Heterogeneity in Large Economies

Author(s) : Gael Giraud, Isabelle Maret

Abstract : Grandmont's ([14]) notion of behavioral heterogeneity is reformulated in a non parametric set-up such that the space of budget share functions admits a ``uniform'' probability distribution. If the population is distributed according to this measure, the aggregate budget share function is constant with respect to changes in prices and income. This exact insensitivity of the market budget share function is known to imply uniqueness and global stability of any competitive equilibrium. Here, it is not explained by any insensitivity property at the micro-economic level, but rather by a perfect 'balancing effect''. Eventually, it is proved that the insensitivity property holds approximately for a finite population sufficiently close to, but distinct from, the perfectly heterogenous one.

Key-words : Aggregation of demand, behavioral heterogeneity, large economy, Law of Demand, Insensitivity of mark

JEL Classification : D11, D12, D30, D41, D50, E1