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Under this condition, even heterogeneous preferences can be represented by a single aggregate agent simply by summing over individual demand to market demand. However, some questions in economic theory cannot be accurately addressed without considering differences across agents, requiring a heterogeneous agent model.
Competitive heterogeneity is a concept from strategic management that examines why industries do not converge on one best way of doing things. In the view of strategic management scholars, the microeconomics of production and competition combine to predict that industries will be composed of identical firms offering identical products at identical prices.
Hartley, however, finds these reasons for representative agent modelling unconvincing. Kirman [2] too, is critical of the representative agent approach in economics. Because representative agent models simply ignore valid aggregation concerns, they sometimes commit the so-called fallacy of composition.
Hart E. Posen is an academic, researcher, and business analyst.He is a Professor of Strategy and Entrepreneurship at Dartmouth College, Tuck School of Business. [1]Posen's research focuses on understanding how companies and entrepreneurs develop and leverage knowledge, capabilities, and innovation to secure competitive advantage and how technological change can erode such advantage.
They relate to the validity of the often convenient assumption that the statistical properties of any one part of an overall dataset are the same as any other part. In meta-analysis, which combines the data from several studies, homogeneity measures the differences or similarities between the several studies (see also Study heterogeneity).
There is heterogeneity in the extent of inequality within households. Intra-household inequality amplifies the effect of the bias on the Engel curve. There is no apparent reason why these sources of heterogeneity are statistically ignorable when estimating household Engel curves.
"Heterogeneity" is also important to the achievement of a common good. Variations (heterogeneity) in the value individuals put on a common good or the effort and resources people give is beneficial, because if certain people stand to gain more, they are willing to give or pay more.
Business economics is a field in applied economics which uses economic theory and quantitative methods to analyze business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with labour, capital and product markets. [1]