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Which demand systems can be generated by discrete choice?

Author

Listed:
  • Armstrong, Mark
  • Vickers, John

Abstract

We provide a simple necessary and sufficient condition for when a multiproduct demand system can be generated from a discrete choice model with unit demands.

Suggested Citation

  • Armstrong, Mark & Vickers, John, 2015. "Which demand systems can be generated by discrete choice?," MPRA Paper 63439, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63439
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    References listed on IDEAS

    as
    1. McFadden, Daniel, 1980. "Econometric Models for Probabilistic Choice among Products," The Journal of Business, University of Chicago Press, vol. 53(3), pages 13-29, July.
    2. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    3. Jaffe Sonia & Weyl E. Glen, 2010. "Linear Demand Systems are Inconsistent with Discrete Choice," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-8, December.
    4. Armstrong, Mark, 2013. "A more general theory of commodity bundling," Journal of Economic Theory, Elsevier, vol. 148(2), pages 448-472.
    5. Jaffe, Sonia & Kominers, Scott Duke, 2012. "Discrete choice cannot generate demand that is additively separable in own price," Economics Letters, Elsevier, vol. 116(1), pages 129-132.
    6. Hanemann, W Michael, 1984. "Discrete-Continuous Models of Consumer Demand," Econometrica, Econometric Society, vol. 52(3), pages 541-561, May.
    7. Anderson, Simon P. & De Palma, Andre & Thisse, Jacques-Francois, 1987. "The CES is a discrete choice model?," Economics Letters, Elsevier, vol. 24(2), pages 139-140.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    2. Daniela Saban & Gabriel Y. Weintraub, 2021. "Procurement Mechanisms for Assortments of Differentiated Products," Operations Research, INFORMS, vol. 69(3), pages 795-820, May.
    3. Bhattacharya, D., 2018. "Income Effects and Rationalizability in Multinomial Choice Models," Cambridge Working Papers in Economics 1884, Faculty of Economics, University of Cambridge.
    4. Jacques-Francois Thisse & Philip Ushchev, 2016. "When Can A Demand System Be Described By A Multinomial Logit With Income Effect?," HSE Working papers WP BRP 139/EC/2016, National Research University Higher School of Economics.
    5. Hedyeh Beyhaghi & Linda Cai, 2023. "Recent Developments in Pandora's Box Problem: Variants and Applications," Papers 2308.12242, arXiv.org.
    6. Amir, Rabah & Erickson, Philip & Jin, Jim, 2017. "On the microeconomic foundations of linear demand for differentiated products," Journal of Economic Theory, Elsevier, vol. 169(C), pages 641-665.
    7. Greminger, Rafael, 2019. "Optimal Search and Awareness Expansion," Other publications TiSEM ac47e6ff-42a4-4d70-addd-6, Tilburg University, School of Economics and Management.
    8. John A List & Ian Muirex & Devin Pope & Gregory Sun, 2023. "Left-Digit Bias at Lyft," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 3186-3237.
    9. Takanori Adachi & Takeshi Ebina, 2016. "Log-linear demand systems with differentiated products are inconsistent with the representative consumer approach," Economics Bulletin, AccessEcon, vol. 36(1), pages 260-267.
    10. Casaburi, Lorenzo & Reed, Tristan, 2017. "Competition in Agricultural Markets: An Experimental Approach," CEPR Discussion Papers 11985, C.E.P.R. Discussion Papers.
    11. Rafael P. Greminger, 2019. "Optimal Search and Discovery," Papers 1911.07773, arXiv.org, revised Feb 2022.
    12. Stephan Müller & Georg Wangenheim, 2017. "The impact of market innovations on the dissemination of social norms: the sustainability case," Journal of Evolutionary Economics, Springer, vol. 27(4), pages 663-690, September.
    13. Volker Nocke & Nicolas Schutz, 2018. "Multiproduct‐Firm Oligopoly: An Aggregative Games Approach," Econometrica, Econometric Society, vol. 86(2), pages 523-557, March.
    14. Choné, Philippe & Linnemer, Laurent, 2020. "Linear demand systems for differentiated goods: Overview and user’s guide," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    15. Petrikaitė, Vaiva, 2018. "A search model of costly product returns," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 236-251.
    16. Debopam Bhattacharya, 2019. "Integrability and Identification in Multinomial Choice Models," Papers 1902.11017, arXiv.org, revised May 2021.
    17. Rafael P. Greminger, 2022. "Optimal Search and Discovery," Management Science, INFORMS, vol. 68(5), pages 3904-3924, May.
    18. Pavan, Alessandro & Fershtman, Daniel, 2020. "Sequential Learning with Endogenous Consideration Sets," CEPR Discussion Papers 15018, C.E.P.R. Discussion Papers.
    19. Greminger, Rafael, 2019. "Optimal Search and Awareness Expansion," Discussion Paper 2019-034, Tilburg University, Center for Economic Research.

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    More about this item

    Keywords

    Discrete choice; unit demand; multiproduct demand functions; demand theory;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L0 - Industrial Organization - - General

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