Stochastic Generalizations of Demand Systems with an Application to TelecommunicationsJoseph Gatto, Harry H. Kelejian, and Scott Stephan ,
4( 3 )
Information Economics and Policy
Systems of demand equations are considered for at least two reasons. First, they offer a theoretical completeness, and second, they embody a number of restrictions which lead to a more parsimonious specification concerning the number of parameters. As it turns out, the quantity and quality of the data are often such that the demand systems considered are not restrictive enough in the sense that large numbers of parameters still remain which cannot be estimated with ‘great precision’. Paradoxically, the restrictions that are considered are often rejected by the data.