A Theory of Random Consumer Demand

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: 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.

Keywords: Consumer demand; random choice; random preference (search for similar items in EconPapers)
JEL-codes: D11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm and nep-mic
Date: Written 2004
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Related works:
Working Paper: A Theory of Random Consumer Demand (2004)
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