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Linear Demand Systems are Inconsistent with Discrete Choice

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  • Jaffe Sonia

    ()
    (Harvard University)

  • Weyl E. Glen

    ()
    (Harvard University)

Abstract

We show that with more than two options, a discrete choice model cannot generate linear demand. In doing so, we demonstrate a prediction of such discrete choice models that is falsifiable based on local second-order properties of demand.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 10 (2010)
Issue (Month): 1 (December)
Pages: 1-8

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Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:52

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Cited by:
  1. Jaffe, Sonia & Kominers, Scott Duke, 2012. "Discrete choice cannot generate demand that is additively separable in own price," Economics Letters, Elsevier, vol. 116(1), pages 129-132.
  2. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
  3. Robert Willig, 2011. "Unilateral Competitive Effects of Mergers: Upward Pricing Pressure, Product Quality, and Other Extensions," Review of Industrial Organization, Springer, vol. 39(1), pages 19-38, August.
  4. Hunold, Matthias & Muthers, Johannes, 2012. "Resale price maintenance and manufacturer competition for retail services," ZEW Discussion Papers 12-028, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528 - 583.

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