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A Theory of Random Consumer Demand


  • McCAUSLAND, William


This paper presents a new theory of random consumer demand. The primitive is a collection of probability distributions, rather than a binary preference. Various assumptions constrain these distributions, including analogues of common assumptions about preferences such as transitivity, monotonicity and convexity. Two results establish a complete representation of theoretically consistent random demand. The purpose of this theory of random consumer demand is application to empirical consumer demand problems. To this end, the theory has several desirable properties. It is intrinsically stochastic, so the econometrician can apply it directly without adding extrinsic randomness in the form of residuals. Random demand is parsimoniously represented by a single function on the consumption set. Finally, we have a practical method for statistical inference based on the theory, described in McCausland (2004), a companion paper.

Suggested Citation

  • McCAUSLAND, William, 2004. "A Theory of Random Consumer Demand," Cahiers de recherche 2004-04, Universite de Montreal, Departement de sciences economiques.
  • Handle: RePEc:mtl:montde:2004-04

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    References listed on IDEAS

    1. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
    2. Barbera, Salvador & Pattanaik, Prasanta K, 1986. "Falmagne and the Rationalizability of Stochastic Choices in Terms of Random Orderings," Econometrica, Econometric Society, vol. 54(3), pages 707-715, May.
    3. Sattath, Shmuel & Tversky, Amos, 1976. "Unite and Conquer: A Multiplicative Inequality for Choice Probabilities," Econometrica, Econometric Society, vol. 44(1), pages 79-89, January.
    4. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
    5. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
    6. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, March.
    7. Gerard Debreu, 1957. "Stochastic Choice and Cardinal Utility," Cowles Foundation Discussion Papers 39, Cowles Foundation for Research in Economics, Yale University.
    8. Bandyopadhyay, Taradas & Dasgupta, Indraneel & Pattanaik, Prasanta K., 1999. "Stochastic Revealed Preference and the Theory of Demand," Journal of Economic Theory, Elsevier, vol. 84(1), pages 95-110, January.
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    Cited by:

    1. Daniel McFadden, 2005. "Revealed stochastic preference: a synthesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(2), pages 245-264, August.
    2. McCausland, William J., 2008. "On Bayesian analysis and computation for functions with monotonicity and curvature restrictions," Journal of Econometrics, Elsevier, vol. 142(1), pages 484-507, January.
    3. McCAUSLAND, William J., 2004. "Bayesian Analysis for a Theory of Random Consumer Demand: The Case of Indivisible Goods," Cahiers de recherche 10-2004, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
    4. WILLIAM J. McCAUSLAND, 2009. "Random Consumer Demand," Economica, London School of Economics and Political Science, vol. 76(301), pages 89-107, February.

    More about this item


    consumer demand; random choice; random eference;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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