{"title":"On the Microfoundation of Linear Oligopoly Demand","authors":"Iwan Bos,Dries Vermeulen","doi":"10.1515/bejte-2019-0114","DOIUrl":null,"url":null,"abstract":"Abstract We critically assess the representative consumer with quadratic aggregate utility function which forms the foundation of a well-known class of linear oligopoly demand structures. It is argued that this approach is problematic and redundant. Regarding the latter, we show how the same demand system can be derived directly from a population of heterogeneous buyers for any number of products. Welfare analyses based on aggregate demand is shown to be sensitive to the underlying microfoundation.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"77 1","pages":"1-15"},"PeriodicalIF":0.0000,"publicationDate":"2020-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"The B.E. Journal of Theoretical Economics","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1515/bejte-2019-0114","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
Abstract We critically assess the representative consumer with quadratic aggregate utility function which forms the foundation of a well-known class of linear oligopoly demand structures. It is argued that this approach is problematic and redundant. Regarding the latter, we show how the same demand system can be derived directly from a population of heterogeneous buyers for any number of products. Welfare analyses based on aggregate demand is shown to be sensitive to the underlying microfoundation.
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