Market Demand

Market Demand: Theory and Empirical Evidence

Werner Hildenbrand
Copyright Date: 1994
Pages: 216
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  • Book Info
    Market Demand
    Book Description:

    In a major work that is the culmination of over a decade of intensive research, Werner Hildenbrand presents a new theory of market demand, the principal aim of which is to identify the conditions under which the Law of Demand holds true. Hildenbrand argues that the Law of Demand is due mainly to the "heterogeneity" of the population of households. In his view, "rationality" of individual behavior plays only a minor role. While the traditional approach to the theory of market demand is to analyze the question, To what extent are the postulated properties of individual behaviorpreservedby going from individual to market demand?, this book asks the question, Which properties of the market demand function are created by the aggregation process?.

    Two hypotheses on the population of households play a key role in Hilden-brand's thinking. The first is the "increasing dispersion" and the second the "increasing spread" of households' demand. These hypotheses can easily be interpreted and are a priori plausible. For a positive theory of market demand, according to Hildenbrand, it is more important that the hypotheses are well supported by empirical evidence. His claims in this important new book are based on a nonparametric statistical data analysis of the U.K. Family Expenditure Survey and the French Enquête Budget de Famille.

    Originally published in 1994.

    ThePrinceton Legacy Libraryuses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These paperback editions preserve the original texts of these important books while presenting them in durable paperback editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

    eISBN: 978-1-4008-6371-6
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-2)
  4. Chapter 1 Introduction
    (pp. 3-29)

    In this book I shall develop a theory ofmarket demand. The principal aim of this theory is to identify the conditions under which the Law¹ of Demand will hold. I shall defend the thesis thatthe Law of Demand is mainly due to the heterogeneity of the population of households; the “rationality” of individual households plays only a minor role. After explaining what I understand by the Law of Demand, it will become clear that my goal is quite modest. However, I believe, it is fundamental.

    What does the Law of Demand assert? First of all the Law of...

  5. Chapter 2 Market Demand
    (pp. 30-71)

    Throughout this book, market demand refers to a large group of households called thepopulationof households. These households are considered at a certaintime period, for example, the year 1992 or the first quarter of 1993. I have in mind households of a certain region, for example, all private households in the United Kingdom. The whole population might be quite heterogeneous. If necessary I shall consider later subpopulations that are stratified in a suitable way. I want to model themean demandfunction, also called themarket demand, of this population. Mean demand thus is average demand per household,...

  6. Chapter 3 Increasing Dispersion
    (pp. 72-121)

    In this chapter I shall try to answer the following question: Under what circumstances does themean demandof a large population of households satisfy Wald’s Axiom?

    In the Introduction I explained why an economic theorist might be interested in deriving Wald’s Axiom for mean demand. Wald’s Axiom for the excess demand of a multicommodity competitive demand–supply system seems to be the weakest assumption, which implies that the equilibrium price system is generically well-determined. For details I refer to Appendix 2.

    Wald’s Axiom for the mean demand$\bar f(p,x)$of a population with identical incomexasserts that for any...

  7. Chapter 4 The Law of Demand
    (pp. 122-167)

    In this chapter I discuss the central theme of demand theory: the Law of Demand for the market demand function. The law asserts that the market demand function\[p \mapsto F(p): = \int_{\mathbb{R} \times \mathcal{A}} {{f^\alpha }(p,x)d\mu } \]is strictly monotone, i.e., for any two price vectorspandqwithpq, one has\[(p-q)\cdot (F(p)-F(q))\textless 0.\]That is to say, the vector of price changes and the vector of demand changes point in opposite directions. (see Figure 4.1)

    As I explained in the introduction, one can derive the monotonicity of the market demand function in theμ-model by simply assuming that the support of the joint distribution of...

  8. Appendix 1 Monotone Functions
    (pp. 168-170)
  9. Appendix 2 Wald’s Axiom
    (pp. 171-174)
  10. Appendix 3 The Weak Axiom of Revealed Preference and the Slutsky Decomposition
    (pp. 175-179)
  11. Appendix 4 Monotonicity of Individual Demand Functions
    (pp. 180-184)
  12. Appendix 5 Spread and Dispersion
    (pp. 185-186)
  13. Appendix 6 The Structure of the Matrix $B(\bar f,\rho )$
    (pp. 187-194)
  14. References
    (pp. 195-198)
  15. Author Index
    (pp. 199-200)
  16. Subject Index
    (pp. 201-204)
  17. Index of Frequently Used Symbols
    (pp. 205-205)