Stochastic complementarity

Paola Manzini, Marco Mariotti, Levant Ülkü

    Research output: Working paperDiscussion paper

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    Abstract

    The Hicksian definition of complementarity and substitutability may not apply in contexts in which agents are not utility maximisers or where price or income variations, whether implicit or explicit, are not available. We look for tools to identify complementarity and substitutability satisfying the following criteria: they are behavioural (based only on observable choice data); model-free (valid whether the agent is rational or not); and they do not rely on price or income variation. We uncover a conflict between properties that any complementarity notion should intuitively possess. We discuss three different possible resolutions of the conflict.
    Original languageEnglish
    Place of PublicationSt Andrews
    PublisherUniversity of St Andrews
    Number of pages39
    Publication statusPublished - 12 Mar 2017

    Publication series

    NameSchool of Economics & Finance Discussion Paper
    PublisherUniversity of St Andrews
    No.1505
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X

    Keywords

    • Complements and substitutes
    • Correlation
    • Stochastic choice

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