5 minor typos edit approved Apr 13 '15 at 17:37 Yann 67833 silver badges1212 bronze badges (1) Does the following result in a "valid" (in the sense of being consistent with the economic theory) market demand function? A consumer $$i$$ maximizes a utiltyutility $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effectedaffected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of being consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlityutility function without the price effect but subject to a budget constraint. With a linear utility function, the maximization problem results in a corner solution of a consumer choosing only one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. (1) Does the following result in a "valid" (in the sense of being consistent with the economic theory) market demand function? A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of being consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, the maximization problem results in a corner solution of a consumer choosing only one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. (1) Does the following result in a "valid" (in the sense of being consistent with the economic theory) market demand function? A consumer $$i$$ maximizes a utility $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly affected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of being consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utility function without the price effect but subject to a budget constraint. With a linear utility function, the maximization problem results in a corner solution of a consumer choosing only one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. 4 added 61 characters in body edited Apr 13 '15 at 15:14 berter 3344 bronze badges (1) Does the following result in a "valid" (in the sense of being consistent with the economic theory) market demand function?  A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of beeingbeing consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, this the maximization problem results in a corner solution of a consumer choosing only one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. (1) Does the following result in a "valid" market demand function? A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of beeing consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, this the maximization problem results in a corner solution of a consumer choosing one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. (1) Does the following result in a "valid" (in the sense of being consistent with the economic theory) market demand function?  A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of being consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, the maximization problem results in a corner solution of a consumer choosing only one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. 3 deleted 28 characters in body edited Apr 13 '15 at 15:08 berter 3344 bronze badges (1) Does the following result in a "valid" market demand function? A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of beeing consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://faculty-gsb.stanford.edu/nair/documents/ChintaguntaNair_DemandSurvey_Round2.pdfhttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, this the maximization problem results in a corner solution of a consumer choosing one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. (1) Does the following result in a "valid" market demand function? A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of beeing consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://faculty-gsb.stanford.edu/nair/documents/ChintaguntaNair_DemandSurvey_Round2.pdf) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, this the maximization problem results in a corner solution of a consumer choosing one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. (1) Does the following result in a "valid" market demand function? A consumer $$i$$ maximizes a utilty $$u_{ij}$$ in choosing one of J alternatives, $$j=1,..,J$$: $$u_{ij} = v_j - \alpha p_j + \epsilon_{ij}$$ where $$v_j$$ is the utility of alternative $$j$$ without the effect of price (i.e. $$-\alpha p_j$$) and the logit error term $$\epsilon_{ij}$$. The market demand results then as the choices of all consumers. Is is in accordance with economic theory to follow (1) and not assume a budget constraint but let the ultility of an alternative be directly effected by price? And additionally assume that a consumer chooses one alternative (i.e., a corner solution follows directly from this assumption). Does (1) result a "valid" (in the sense of beeing consistent with the economic theory) market demand function ? (2) Typically the theory of the microeconomic foundation of logit choice model (e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718571) assumes that consumers maximize a utlity function without the price effect but subject to a budget constraint. With a linear utility function, this the maximization problem results in a corner solution of a consumer choosing one choice alternative. This setup (as outlined in the cited paper) leads than to the market demand. 2 edited body edited Apr 13 '15 at 15:01 berter 3344 bronze badges 1 asked Apr 13 '15 at 14:55 berter 3344 bronze badges