The one-dimensional kinematical sedimentation theory for suspensions of small spheres of equal size and density is generalized to polydisperse suspensions and several space dimensions. The resulting mathematical model, obtained by introducing constitutive assumptions and performing a dimensional analysis, is a system of first-order conservation laws for the concentrations of the solids species coupled to a variant of the Stokes system for incompressible flow describing the mixture. Various flux density vectors for the first-order system have been proposed in the literature. Some of them cause the first-order system of conservation laws to be non-hyperbolic, or to be of mixed hyperbolic-elliptic type in the bidisperse case. The criterion for ellipticity is equivalent to a well-known instability criterion predicting phenomena like blobs and viscous fingering in bidisperse sedimentation. We show that loss of hyperbolicity, that is the occurrence of complex eigenvalues of the Jacobian of the first-order system, can be viewed as an instability criterion for arbitrary polydisperse suspensions, and that for tridisperse mixtures this criterion can be evaluated by a convenient calculation of a discriminant. We determine instability regions (or alternatively prove stability) for three different choices of the flux vector of the first-order system of conservation laws. Consequently, mixed or non-hyperbolic, rather than hyperbolic, systems of conservation laws are the appropriate general mathematical framework for polydisperse sedimentation. The stability analysis examines a first-order system of conservation laws, but its predictions are applicable to the full multidimensional system of model equations. The findings are consistent with experimental evidence and are appropriately embedded into the current state of knowledge of non-hyperbolic systems of conservation laws.