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

Yukihiro Kidokoro

No 07-07, GRIPS Discussion Papers from 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.

Keywords: Discrete choice; representative consumer; endogenous demand; logit model; generalized extreme value model (search for similar items in EconPapers)
JEL-codes: D11 D61 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2007-10, Revised 2008-11
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Persistent link: https://EconPapers.repec.org/RePEc:ngi:dpaper:07-07

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