chapter  2
14 Pages

Contextual Prerequisites

WithDavid A. Hensher, Lester W. Johnson, J.J. Louviere, J. Horowitz

Unit-environment constraints reflect the fact that several factors, as well as the individual budgets must be considered when an individual attempts to maximise utility. The traditional economic assumption is that commodities are finely divisible and the arguments entering the utility expression of the individual are quantities of various commodities consumed. Grouping of individuals which display heterogeneity should be delayed as long as is possible and desirably only used, given the state of the art, after model analysis. Individual demand, for our purposes, will be defined as the selection decision between commodities which are perceived to be available in a measurable continuum. S. Rosen's model is more appropriate in a discrete-choice theoretical framework, although it still links utility directly to the objective characteristics of goods. The paradigm of choice links utility to goods and utility to objective characteristics via a complex function of function(s).