Bayesian Analysis for a Theory of Random Consumer Demand: The Case of Indivisible Goods

William McCausland ()

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

Abstract: McCausland (2004a) describes a new theory of random consumer demand. Theoretically consistent random demand can be represented by a "regular" "L-utility" function on the consumption set X. The present paper is about Bayesian inference for regular L-utility functions. We express prior and posterior uncertainty in terms of distributions over the infinite-dimensional parameter set of a flexible functional form. We propose a class of proper priors on the parameter set. The priors are flexible, in the sense that they put positive probability in the neighborhood of any L-utility function that is regular on a large subset (line over X) of X; and regular, in the sense that they assign zero probability to the set of L-utility functions that are irregular on (line over X) X . We propose methods of Bayesian inference for an environment with indivisible goods, leaving the more difficult case of infinitely divisible goods for another paper. We analyse individual choice data from a consumer experiment described in Harbaugh et al. (2001).

Keywords: consumer demand; bayesian methods; flexible functional Forms; shape restrictions (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004
New Economics Papers: this item is included in nep-dcm and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Bayesian Analysis for a Theory of Random Consumer Demand: The Case of Indivisible Goods (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:10-2004

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