Les Cahiers de Recherche - HEC Paris
POLEMARCHAKIS Heracles M., CHIAPPORI Pierre-Andre, EKELAND Ivar and KÜBLER Felix
The Identification of Preferences from Equilibrium Prices
Abstract: The fundamentals of an exchange economy, the preferences
of individuals, can be identified from the competitive equilibrium
correspondence, which associates equilibrium prices of commodities to
allocations of endowments; the argument extends to production economies.
The essential step is the identification of fundamentals from aggregate
demand as a function of the prices of commodities and the distribution of
income. The graph of the equilibrium correspondence or of the aggregate
demand function satisfy non-trivial restrictions. The identification of
fundamentals allows for the prediction of the response of individuals and
the economy to changes in the organization of production and exchange,
while restrictions on the equilibrium correspondence or the aggregate
demand function imply that general theory has testable implications.
Keywords: aggregation; equilibrium; identification; testability; (follow links to similar papers)
JEL-Codes: D10; D50; (follow links to similar papers)
20 pages, November 15, 1999
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