A Note on Stochastic Complementarity for the Applied Researcher

Alessandro Iaria; Ao Wang

doi:10.1016/j.econlet.2021.109731

A Note on Stochastic Complementarity for the Applied Researcher

Alessandro Iaria^*, Ao Wang^*

^*Corresponding author for this work

School of Economics

Research output: Contribution to journal › Article (Academic Journal) › peer-review

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Abstract

In their discussion of stochastic complementarity, Manzini et al. (2018) show that the intuitively appealing correlation criterion does not—in general—satisfy the axiom of monotonicity: products classified as complements can turn into substitutes following an increase in their joint purchases. In this note, we show that, however, by restricting attention to mixed logit models along the lines of Gentzkow (2007)’s, one can prevent such violations.

Original language	English
Article number	109731
Number of pages	3
Journal	Economics Letters
Volume	199
Early online date	6 Jan 2021
DOIs	https://doi.org/10.1016/j.econlet.2021.109731
Publication status	Published - Feb 2021

Structured keywords

ECON Microeconomic Theory
ECON Econometrics

Keywords

Complementarity
Demand for bundles
Mixed-logit model
Correlation
Monotonicity axiom

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10.1016/j.econlet.2021.109731

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Dr Alessandro Iaria
- alessandro.iariabristol.acuk
- School of Economics - Senior Lecturer in Economics
Person: Academic

Cite this

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title = "A Note on Stochastic Complementarity for the Applied Researcher",

abstract = "In their discussion of stochastic complementarity, Manzini et al. (2018) show that the intuitively appealing correlation criterion does not—in general—satisfy the axiom of monotonicity: products classified as complements can turn into substitutes following an increase in their joint purchases. In this note, we show that, however, by restricting attention to mixed logit models along the lines of Gentzkow (2007){\textquoteright}s, one can prevent such violations.",

keywords = "Complementarity, Demand for bundles, Mixed-logit model, Correlation, Monotonicity axiom",

author = "Alessandro Iaria and Ao Wang",

year = "2021",

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language = "English",

volume = "199",

journal = "Economics Letters",

issn = "0165-1765",

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T1 - A Note on Stochastic Complementarity for the Applied Researcher

AU - Iaria, Alessandro

AU - Wang, Ao

PY - 2021/2

Y1 - 2021/2

N2 - In their discussion of stochastic complementarity, Manzini et al. (2018) show that the intuitively appealing correlation criterion does not—in general—satisfy the axiom of monotonicity: products classified as complements can turn into substitutes following an increase in their joint purchases. In this note, we show that, however, by restricting attention to mixed logit models along the lines of Gentzkow (2007)’s, one can prevent such violations.

AB - In their discussion of stochastic complementarity, Manzini et al. (2018) show that the intuitively appealing correlation criterion does not—in general—satisfy the axiom of monotonicity: products classified as complements can turn into substitutes following an increase in their joint purchases. In this note, we show that, however, by restricting attention to mixed logit models along the lines of Gentzkow (2007)’s, one can prevent such violations.

KW - Complementarity

KW - Demand for bundles

KW - Mixed-logit model

KW - Correlation

KW - Monotonicity axiom

U2 - 10.1016/j.econlet.2021.109731

DO - 10.1016/j.econlet.2021.109731

M3 - Article (Academic Journal)

VL - 199

JO - Economics Letters

JF - Economics Letters

SN - 0165-1765

M1 - 109731

ER -

A Note on Stochastic Complementarity for the Applied Researcher

Abstract

Structured keywords

Keywords

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Dr Alessandro Iaria

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