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When Can a Demand System Be Described by a Multinomial Logit with Income Effect?

Higher School of Economics Research Paper No. WP BRP 139/EC/2016

20 Pages Posted: 2 Jun 2016

See all articles by Jacques-François Thisse

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Philip Ushchev

HSE Moscow

Date Written: May 31, 2016

Abstract

We show that a wide class of demand systems for differentiated products, such as those generated by additive preferences, indirectly additive preferences, and Kimball-like homothetic preferences, can be given a multinomial logit foundation provided that the conditional indirect utility is nonlinear and varies with the whole price array.

Keywords: discrete choice, multinomial logit, demand systems, additive preferences, homothetic preferences

JEL Classification: D43, L11, L13

Suggested Citation

Thisse, Jacques-François and Ushchev, Philip, When Can a Demand System Be Described by a Multinomial Logit with Income Effect? (May 31, 2016). Higher School of Economics Research Paper No. WP BRP 139/EC/2016. Available at SSRN: https://ssrn.com/abstract=2787822 or http://dx.doi.org/10.2139/ssrn.2787822

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Philip Ushchev (Contact Author)

HSE Moscow ( email )

26 Shabolovka
Moscow
Russia

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