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A Representative Consumer Theory of the Logit Model

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  • Anderson, Simon Peter
  • de Palma, Andre
  • Thisse, Jacques-Francois

Abstract

The log it model is usually derived from a discrete choice approach with stoc hastic utilities. It is shown here that the logit demand system may also be derived from the maximization of a deterministic, entropy-type utility. The latter may be interpreted as the preference function of a representative consumer with variety-seeking behavior. This altern ative view suggests a generalization of the standard logit which allo ws total demand to be determined endogenously. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 29 (1988)
Issue (Month): 3 (August)
Pages: 461-66

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Handle: RePEc:ier:iecrev:v:29:y:1988:i:3:p:461-66

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Cited by:
  1. Verboven, Frank, 1996. "The nested logit model and representative consumer theory," Economics Letters, Elsevier, vol. 50(1), pages 57-63, January.
  2. Sánchez Navarro, Dennis, 2013. "Análisis de elasticidades en el mercado automotor colombiano (2009 - 2011) mediante un modelo logit anidado
    [Analysis Of Elasticity In Colombian Automotive Market (2009 - 2011) Through A Nested Lo
    ," MPRA Paper 46043, University Library of Munich, Germany.
  3. Marc Gaudry & Emile Quinet, 2012. "Shannon's measure of information, path averages and the origins of random utility models in transport itinerary or mode choice analysis," PSE Working Papers halshs-00713168, HAL.
  4. Robert C. Feenstra & James A. Levinsohn, 1989. "Distance, Demand, and Oligopoly Pricing," NBER Working Papers 3076, National Bureau of Economic Research, Inc.
  5. Henkel, Joachim & von Hippel, Eric, 2003. "Welfare Implications of User Innovation," CEPR Discussion Papers 4063, C.E.P.R. Discussion Papers.
  6. Maruyama, Masayoshi & Minamikawa, Kazumitsu, 2009. "Vertical integration, bundled discounts and welfare," Information Economics and Policy, Elsevier, vol. 21(1), pages 62-71, February.
  7. repec:hal:wpaper:halshs-00713168 is not listed on IDEAS
  8. Anderson, Simon P. & de Palma, André, 2012. "Oligopoly and Luce's Choice Axiom," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1053-1060.
  9. Tscharaktschiew, Stefan & Hirte, Georg, 2009. "An urban general equilibrium model with multiple household structures and travel mode choice," Dresden Discussion Paper Series in Economics 06/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  10. Delle Site, Paolo, 2013. "Integration of choice probabilities in logit," Economics Letters, Elsevier, vol. 120(1), pages 57-60.
  11. Oppenheim, Norbert, 1995. "On the integrability problem in discrete spatial activity systems with site and network externalities," Regional Science and Urban Economics, Elsevier, vol. 25(1), pages 85-108, February.
  12. Truong, Truong P. & Hensher, David A., 2012. "Linking discrete choice to continuous demand within the framework of a computable general equilibrium model," Transportation Research Part B: Methodological, Elsevier, vol. 46(9), pages 1177-1201.
  13. Konno, Tomohiko, 2012. "An alternative explanation for the logit form probabilistic choice model from the equal likelihood hypothesis," Economics Letters, Elsevier, vol. 115(3), pages 519-522.
  14. Melo, Emerson, 2012. "A representative consumer theorem for discrete choice models in networked markets," Economics Letters, Elsevier, vol. 117(3), pages 862-865.
  15. Rhee, Byong-Duk, 2006. "First-mover disadvantages with idiosyncratic consumer tastes along unobservable characteristics," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 99-117, January.
  16. Simon P. Anderson & Andre de Palma, 1989. "The Logit as a Model of Product Differentiation: Further Results and Extensions," Discussion Papers 913, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Sengupta, Abhijit & Greetham, Danica Vukadinovic, 2010. "Dynamics of brand competition: Effects of unobserved social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2391-2406, December.
  18. Kraft, Edwin R., 2002. "Scheduling railway freight delivery appointments using a bid price approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(2), pages 145-165, February.

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