Errors of aggregation and errors of specification in a consumer demand model: a theoretical note

Abstract Consumer demand models based on the concept of a representative or average consumer suffer from aggregation error. Misspecification of the underlying micro utility‐maximizing model, which is virtually inevitable, also results in error. This note provides a theoretical investigation of the relationship between the two types of error. Misspecified expenditure support functions for demand systems at the micro level induce the same …