We show that with more than two options, a discrete choice model cannot generate linear demand. In doing so, we demonstrate a prediction of such discrete choice models that is falsifiable based on local second-order properties of demand.
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Linear Demand Systems are Inconsistent with Discrete Choice
1Harvard University, sjaffe@fas.harvard.edu
2Harvard University, weyl@fas.harvard.edu
Citation Information: The B.E. Journal of Theoretical Economics. Volume 10, Issue 1, Pages –, ISSN (Online) 1935-1704, DOI: 10.2202/1935-1704.1729, December 2010
Publication History:
- Published Online:
- 2010-12-21
Keywords: linear demand; discrete choice
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