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Stochastic Complementarity

Author

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  • Manzini, Paola

    (University of Bristol)

  • Mariotti, Marco

    (Queen Mary, University of London)

  • Ülkü, Levent

    (ITAM, Mexico)

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

  • Manzini, Paola & Mariotti, Marco & Ülkü, Levent, 2018. "Stochastic Complementarity," IZA Discussion Papers 11296, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11296
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    References listed on IDEAS

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    Cited by:

    1. Iaria, Alessandro & ,, 2020. "Identification and Estimation of Demand for Bundles," CEPR Discussion Papers 14363, C.E.P.R. Discussion Papers.
    2. Iaria, Alessandro & ,, 2020. "Inferring Complementarity from Correlations rather than Structural Estimation," CEPR Discussion Papers 14273, C.E.P.R. Discussion Papers.
    3. 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.
    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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    More about this item

    Keywords

    complements and substitutes; correlation; stochastic choice;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General

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