Stochastic complementarity

Paola Manzini, Marco Mariotti, Levent Ülkü

    Research output: Contribution to journalArticlepeer-review

    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 it is arguably reasonable for a complementarity notion to possess. We discuss three different possible resolutions of the conflict.
    Original languageEnglish
    Pages (from-to)1343-1363
    JournalThe Economic Journal
    Volume129
    Issue number619
    Early online date8 Jun 2018
    DOIs
    Publication statusPublished - Apr 2019

    Keywords

    • Complements and substitues
    • Correlation
    • Stochastic choice

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