An Additive, Perfect Price Aggregate Model of Demand
(1975) , 30 pages
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- Abstract
- (en) This paper develops an estimable demand system which allows the explicit formulation of commodity aggregates according to the theory of price aggregation and which is empirically interesting. The reason for attempting to make the aggregation over commodities explicit is that the notion of a preference preordering, which allows us to rely on the theory of demand, is intuitively appealing when dealing with detailed commodities but it loses its appeal when dealing with broad aggregates. From the point of view of applied demand analysis the theory of price aggregation is, in part, simply an attempt to select the most desirable price indices for the purposes of estimation. A difficulty with this approach is that the proper price indices depend upon the preferences among commodities included in the index. Since these preferences are not known, empirical applications of the approach will necessarily involve estimating at least some elements of detailed demand functions. In the model we introduce, the full detailed demand functions are to be estimated.
- Affiliations
Citations
Anderson, R. (1975). An Additive, Perfect Price Aggregate Model of Demand (Working Papers Institut des sciences économiques 7511). https://hdl.handle.net/2078.5/275867