Consumer preference changes in the logit demand model

Abstract

I characterize how changes in consumer preferences for an attribute affect demand in the logit random utility model. The expressions take on simple and intuitive forms. Additionally, the expressions do not depend on observing or estimating the consumer’s taste parameters and can be calculated based on knowledge of choice probabilities and product attributes.

Keywords:

• logit demand
• consumer preferences
• comparative statics

JEL Classification:

• D11

Acknowledegement

I thank Dan Becker, Erez Yoeli and Brian Rowe for helpful comments and suggestions. All errors are my own.

Notes

¹ See, for example, Train (2009) and Greene (2012).

² For example, the United States Food and Drug Administration no longer provides for the use of BPA in infant formula packaging because of market abandonment. See https://www.federalregister.gov/articles/2013/07/12/2013-16684/indirect-food-additives-adhesives-and-components-of-coatings

³ Huffman et al. (2007) shows how new information about GMOs affects consumers’ willingness to pay for GMO foods.