A Note on Stochastic Complementarity for the Applied Researcher

Alessandro Iaria*, Ao Wang*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

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 languageEnglish
Article number109731
Number of pages3
JournalEconomics Letters
Volume199
Early online date6 Jan 2021
DOIs
Publication statusPublished - Feb 2021

Structured keywords

  • ECON Microeconomic Theory
  • ECON Econometrics

Keywords

  • Complementarity
  • Demand for bundles
  • Mixed-logit model
  • Correlation
  • Monotonicity axiom

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