Publication

2006 - Division of Research, Harvard Business School, Boston, Massachusetts

Language

English

Word Count

5,250 words, Guess

Page Count

21 pages

Identifiers

Description

This article identifies a property of several standard discrete-choice models that amounts to an implicit assumption about individual choice behavior. This property, which I call the Invariant Proportion of Substitution (IPS), implies that the proportion of growth in expected own-good choice that an individual consumer draws from a given competing alternative is the same no matter which own-good attribute is improved. The IPS and Independence from Irrelevant Alternatives (IIA) properties are similar. But models that relax IIA, such as generalized extreme value (GEV) and covariance probit models, do not necessarily also relax IPS. Some models that do relax IPS are discussed.

Subjects

Series Statement

  • Working paper / Division of Research, Harvard Business School -- 05-022

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