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Nonrepresentative representative consumers

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  • Jerison, Michael

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.

Suggested Citation

  • Jerison, Michael, 1997. "Nonrepresentative representative consumers," UC3M Working papers. Economics 4137, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:4137
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    References listed on IDEAS

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    1. Michael Jerison, 1994. "Optimal Income Distribution Rules and Representative Consumers," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(4), pages 739-771.
    2. Jerison, Michael, 1997. "Nonrepresentative representative consumers," UC3M Working papers. Economics 4137, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Hardle, Wolfgang & Hildenbrand, Werner & Jerison, Michael, 1991. "Empirical Evidence on the Law of Demand," Econometrica, Econometric Society, vol. 59(6), pages 1525-1549, November.
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    Cited by:

    1. JÊrÆme B. Detemple & Piero Gottardi, 1998. "Aggregation, efficiency and mutual fund separation in incomplete markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(2), pages 443-455.
    2. Jean-Michel Grandmont & Alan Kirman, 1996. "Aggregation, Learning and Rationality," International Economic Association Series, in: Beth Allen (ed.), Economics in a Changing World, chapter 3, pages 63-89, Palgrave Macmillan.
    3. Simone Landini & Mauro Gallegati & J. Barkley Rosser, 2020. "Consistency and incompleteness in general equilibrium theory," Journal of Evolutionary Economics, Springer, vol. 30(1), pages 205-230, January.
    4. Michael Jerison, 1997. "Nonrepresentative Representative Consumers," Discussion Papers 97-01, University at Albany, SUNY, Department of Economics.
    5. Alan Kirman, 1996. "Book Reviews," Journal of Economic Methodology, Taylor & Francis Journals, vol. 3(2), pages 322-333.
    6. Bos Iwan & Vermeulen Dries, 2022. "On the Microfoundation of Linear Oligopoly Demand," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 22(1), pages 1-15, January.
    7. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    8. Alan Kirman, 2016. "Complexity and Economic Policy: A Paradigm Shift or a Change in Perspective? A Review Essay on David Colander and Roland Kupers's Complexity and the Art of Public Policy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 534-572, June.
    9. Chiappori, Pierre-André, 2005. "Conférence François-Albert-Angers 2004," L'Actualité Economique, Société Canadienne de Science Economique, vol. 81(3), pages 405-419, Septembre.
    10. Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, vol. 91(3), pages 509-524, June.

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    More about this item

    Keywords

    Representative consumer;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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