On substitutability and complementarity in discrete choice models

• Main Authors: FENG, Guiyun, LI, Xiaobo, WANG, Zizhuo
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Discrete choice models; Substitutability; Complementarity; Halo effect; Random utility model; Representative agent model; Operations and Supply Chain Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6499; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7498/viewcontent/Substitutability_Complementarity_DCM_sv.pdf
• Institution: Singapore Management University

In this paper, we propose the concepts of substitutability and complementarity in discrete choice models. These concepts concern whether the choice probability of one alternative in a choice model increases or decreases with the utility of another alternative, and they play important roles in capturing certain practical choice patterns, such as the halo effect. We study conditions on discrete choice models that will lead to substitutability and complementarity. We also present ways of constructing choice models that exhibit complementary property.