Editing Representative agent (section)

{{more footnotes|date=April 2010}}
[[Economist]]s use the term '''representative agent''' to refer to the typical decision-maker of a certain type (for example, the typical consumer, or the typical firm).

More technically, an [[Model (economics)|economic model]] is said to have a representative agent if all [[Agent (economics)|agents]] of the same type are identical. Also, economists sometimes say a model has a representative agent when agents differ, but act in such a way that the sum of their choices is mathematically equivalent to the decision of one individual or many identical individuals. This occurs, for example, when preferences are [[Gorman polar form|Gorman aggregable]]. A model that contains many different agents whose choices cannot be aggregated in this way is called a '''[[heterogeneous agent model]]'''.

The notion of the representative agent can be traced back to the late 19th century. [[Francis Edgeworth]] (1881) used the term "representative particular", while [[Alfred Marshall]] (1890) introduced a "representative firm" in his ''Principles of Economics''. However, after [[Lucas critique|Robert Lucas, Jr.'s critique]] of econometric policy evaluation spurred the development of [[microfoundations]] for macroeconomics, the notion of the representative agent became more prominent and more controversial. Many [[macroeconomic model]]s today are characterized by an explicitly stated [[optimization]] problem of the representative [[Agent (economics)|agent]], which may be either a consumer or a producer (or, frequently, both types of representative agents are present). The derived individual demand or supply curves are then used as the corresponding aggregate demand or supply curves. Since it has been shown that the commonly used demand functions do not aggregate to representative agents, the implications of representative agents models need not, and are unlikely to, hold for individual consumers.<ref name="Jackson & Yariv">Jackson, Matthew O. and Yariv, Leeat, "The Non-Existence of Representative Agents" (September 7, 2017). {{ssrn|2684776}}. {{doi|10.2139/ssrn.2684776}}.</ref>