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Economic Choices

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  • Daniel McFadden

Abstract

This Nobel lecture discusses the microeconometric analysis of choice behavior of consumers who face discrete economic alternatives.Before the 1960's, economists used economic theory mostly as a logical tool, to explore conceptually the properties of alternative market organizations and economic policies. When the theory was applied empirically, it was to market-level or national-accounts-level data. In these applications, the theory was usually developed in terms of a representative agent, with market-level behavior given by the representative agent's behavior writ large. When observations deviated from those implied by the representative agent theory, these difference were swept into an additive disturbance and attributed to data measurement errors, rather than to unobserved factors within or across individual agents. In statistical language, traditional consumer theory placed structural restrictions on mean behavior, but the distribution of responses about their mean was not tied to the theory.
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Suggested Citation

  • Daniel McFadden, 2001. "Economic Choices," American Economic Review, American Economic Association, vol. 91(3), pages 351-378, June.
  • Handle: RePEc:aea:aecrev:v:91:y:2001:i:3:p:351-378
    Note: DOI: 10.1257/aer.91.3.351
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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies

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