Discrete Choice Cannot Generate Demand That Is Additively Separable in Own Price

Sonia  Jaffe; Scott Duke Kominers

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Article | Economics Letters | July 2012

Discrete Choice Cannot Generate Demand That Is Additively Separable in Own Price

by Sonia Jaffe and Scott Duke Kominers

Abstract

We show that in a unit demand discrete choice framework with at least three goods, demand cannot be additively separable in own price. This result sharpens the analogous result of Jaffe and Weyl (2010) in the case of linear demand and has implications for testing of the discrete choice assumption, out-of-sample prediction, and welfare analysis.

Keywords: Discrete choice; Unit demand; Separable demand; Linear demand; Demand and Consumers; Market Design; Mathematical Methods; Economics;

Format: Print

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Citation:

Jaffe, Sonia, and Scott Duke Kominers. "Discrete Choice Cannot Generate Demand That Is Additively Separable in Own Price." Economics Letters 116, no. 1 (July 2012): 129–132.

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Scott Duke Kominers

MBA Class of 1960 Associate Professor of Business Administration

Entrepreneurial Management

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Discrete Choice Cannot Generate Demand That Is Additively Separable in Own Price

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