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A Representative Consumer Framework for Discrete Choice Models with Endogenous Total Demand

Author

Listed:
  • Yukihiro Kidokoro

    (National Graduate Institute for Policy Studies)

Abstract

Standard discrete choice models correspond to 'partial' utility maximization in which the controlled total is determined exogenously; typically, consumers are assumed to demand at most one unit. The purpose of this paper is to formulate a model in which discrete choice models are incorporated consistently into the full utility maximization framework and to establish a theoretical foundation for discrete choice models that assume no a priori controlled total. We derive the form of the corresponding indirect utility function of a representative consumer and the own-price and cross-price elasticities, and develop a method for measuring welfare, clarifying their implications.

Suggested Citation

  • Yukihiro Kidokoro, 2007. "A Representative Consumer Framework for Discrete Choice Models with Endogenous Total Demand," GRIPS Discussion Papers 07-07, National Graduate Institute for Policy Studies, revised Nov 2008.
    • Handle: RePEc:ngi:dpaper:07-07
    as

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    References listed on IDEAS

    as
    1. A. de Palma & K. Kilani, 2003. "Compensating Variation for Discrete Choice Models," THEMA Working Papers 2003-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. DE PALMA, André & KILANI, Karim, 2003. "(Un)conditional distribution of compensating variation in discrete choice models," LIDAM Discussion Papers CORE 2003100, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Discrete choice; representative consumer; endogenous demand; logit model; generalized extreme value model;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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