2024/03/13 by Sebastiaan Maes, Maes, Sebastiaan, Raghav Malhotra +1
Business, Management and Accounting · Economics, Econometrics and Finance · #Consumer Market Behavior and Pricing #Economics of Agriculture and Food Markets #FOS: Economics and business #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2407.01538
openalex publication_date 2024/03/13 · openalex created_date 2024/07/06 · openalex updated_date 2026/07/28
We study a setting where an analyst has access to purely aggregate information about the consumption choices of a heterogenous population of individuals. We show that observing the statistical moments of market demand allows the analyst to test aggregate data for rationality. Interestingly, just the mean and variance of demand carry observable restrictions. This is in stark contrast to impossibility result of the Sonnenschein-Mantel-Debreu theorem, which shows that aggregate demand carries no observable restrictions at all. We leverage our approach to deliver a characterization of rationality in terms of moments for the common two-good case. We illustrate the usefulness of moment-based restrictions through two applications: (i) improving the precision of demand and welfare estimates; and (ii) testing for the existence of a welfare-relevant representative consumer.