GRIPS 政策研究センター Policy Research Center


Oct 1, 2007 Report No:07-07

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

Field Economics
Language English

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
attachment 07-07_revised.pdf