Allowing for complementarity and rich substitution patterns in multiple discrete–continuous models

• We develop a multiple discrete–continuous model that accommodates complementarity.
• Three different non-additive utility formulations are considered and examined.
• The non-additive formulations perform better than the traditional formulation.

Many consumer choice situations are characterized by the simultaneous demand for multiple alternatives that are imperfect substitutes for one another, along with a continuous quantity dimension for each chosen alternative. To model such multiple discrete–continuous choices, most multiple discrete–continuous models in the literature use an additively-separable utility function, with the assumption that the marginal utility of one good is independent of the consumption of another good. In this paper, we develop model formulations for multiple discrete–continuous choices that accommodate rich substitution structures and complementarity effects in the consumption patterns, and demonstrate an application of the model to transportation-related expenditures using data drawn from the 2002 Consumer Expenditure (CEX) Survey.