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Stochastic Complementarity

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  • Paola Manzini
  • Marco Mariotti
  • Levent Ülkü

Abstract

The Hicksian definition of complementarity and substitutability may not apply in contexts in which agents are not utility maximisers or where price or income variations, whether implicit or explicit, are not available. We look for tools to identify complementarity and substitutability satisfying the following criteria: they are behavioural (based only on observable choice data); model-free (valid whether the agent is rational or not) and they do not rely on price or income variation. We uncover a conflict between properties that it is arguably reasonable for a complementarity notion to possess. We discuss three different possible resolutions of the conflict.

Suggested Citation

  • Paola Manzini & Marco Mariotti & Levent Ülkü, 2019. "Stochastic Complementarity," The Economic Journal, Royal Economic Society, vol. 129(619), pages 1343-1363.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:619:p:1343-1363.
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    File URL: http://hdl.handle.net/10.1111/ecoj.12601
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    Cited by:

    1. Roy Allen & John Rehbeck, 2023. "Revealed stochastic choice with attributes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(1), pages 91-112, January.
    2. Iaria, Alessandro & ,, 2020. "Identification and Estimation of Demand for Bundles," CEPR Discussion Papers 14363, C.E.P.R. Discussion Papers.
    3. Iaria, Alessandro & ,, 2020. "Inferring Complementarity from Correlations rather than Structural Estimation," CEPR Discussion Papers 14273, C.E.P.R. Discussion Papers.
    4. Iaria, Alessandro & Wang, Ao, 2021. "A note on stochastic complementarity for the applied researcher," Economics Letters, Elsevier, vol. 199(C).
    5. Roy Allen & John Rehbeck, 2020. "Hicksian complementarity and perturbed utility models," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 245-261, October.

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