%0 DATA
%A Jane M., Stagoll
%D 2017
%T The stochastic specification of demand share equations: restricting predicted budget shares to the unit simplex
%U https://bridges.monash.edu/articles/The_stochastic_specification_of_demand_share_equations_restricting_predicted_budget_shares_to_the_unit_simplex/5648479
%R 10.4225/03/5a1f898fc494c
%K Demand (Economic theory)
%K Econometric models
%K Multivariate analysis
%X In the context of estimating systems of demand share equations, the argument that "the component (shares) predicted or implied by the model should be non-negative and sum to (unity)" (Bewley (1980), p.2) is not new. As a result, the aggregation restrictions should play a central role in the analysis of demandÂ· share equations.The traditional approach to estimating such systems of demand share equations is to append a multivariate normal stochastic component and carry out the estimation. However, such a specification does not exploit the aggregation restriction to its full extent. That is, although we may specify a deterministic component that is restricted to the (0,1) interval, the use of an additive multivariate normal error term means that there is, at least in theory, a non-zero probability that the shares implied or predicted by the model will be outside the(0,1) interval. [...]