Title: The invariant proportion of substitution (IPS) property of discrete-choice models
Description: This article identifies a property of several standard discrete-choice models that amounts to an implicit assumption about individual choice behavior. This property, which I call the Invariant Proportion of Substitution (IPS), implies that the proportion of growth in expected own-good choice that an individual consumer draws from a given competing alternative is the same no matter which own-good attribute is improved. The IPS and Independence from Irrelevant Alternatives (IIA) properties are similar. But models that relax IIA, such as generalized extreme value (GEV) and covariance probit models, do not necessarily also relax IPS. Some models that do relax IPS are discussed.
Subjects: Econometric models