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Integrability and aggregation in the theory of demand

  • Hotelling Symposium
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Abstract

Harold Hotelling believed that integrability was a necessary characteristic of both individual and market demand equations, and he demonstrated that it would hold if consumers did not have a budget constraint. If there was a budget constraint, he contended, the usual integrability condition would be replaced by a condition which assures that an integrating factor can be introduced. This paper shows that this condition can be satisfied only if the consumer's income effect is the same numerically for all goods. Aggregation by summation of individual demands is considered, and it is shown that this form of aggregation is valid if there is a budget constraint only when income effects are the same for all individuals.

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Authors and Affiliations

  1. University of North Carolina at Chapel Hill, USA

    Ralph W. Pfouts

Authors
  1. Ralph W. Pfouts
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Pfouts, R.W. Integrability and aggregation in the theory of demand. Atlantic Economic Journal 23, 176–188 (1995). https://doi.org/10.1007/BF02299028

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  • DOI: https://doi.org/10.1007/BF02299028

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