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The Exact Insensitivity of Market Budget Shares and the "Balancing Effect"

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  • Gaël Giraud

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Isabelle Maret

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

We reformulate Grandmont's and its successors' notion of behavioral heterogeneity such as to get the exact insensitivity of the aggregate budget share function with respect to changes in prices and income, instead of a mere approximate insensitivity. We propose a non parametric set-up such that, if the population is distributed according to some "uniform" probability measure, the aggregate budget share function is constant. The important contribution is that this exact insensitivity is not explained by any insensitivity at the microeconomic level but rather by an exact "balancing effect". We give illustrative examples of populations that fulfill our requirements.

Suggested Citation

  • Gaël Giraud & Isabelle Maret, 2007. "The Exact Insensitivity of Market Budget Shares and the "Balancing Effect"," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00155753, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00155753
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00155753
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    More about this item

    Keywords

    Law of demand; Balancing effect; Behavioral heterogeneity; Aggregation of demand; Large economy; Économie non-atomique; Effet de balancement; Hétérogénéité; Agrégation de la demande; Loi de la demande;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D30 - Microeconomics - - Distribution - - - General
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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