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Random choice as behavioral optimization

Author(s): Gul, Faruk R.; Natenzon, P; Pesendorfer, W

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Abstract: © 2014 The Econometric Society. We develop an extension of Luce's random choice model to study violations of the weak axiom of revealed preference. We introduce the notion of a stochastic preference and show that it implies the Luce model. Then, to address well-known difficulties of the Luce model, we define the attribute rule and establish that the existence of a welldefined stochastic preference over attributes characterizes it. We prove that the set of attribute rules and random utility maximizers are essentially the same. Finally, we show that both the Luce and attribute rules have a unique consistent extension to dynamic problems.
Publication Date: Sep-2014
Citation: Gul, F, Natenzon, P, Pesendorfer, W. (2014). Random choice as behavioral optimization. Econometrica, 82 (5), 1873 - 1912. doi:10.3982/ECTA10621
DOI: doi:10.3982/ECTA10621
ISSN: 0012-9682
EISSN: 1468-0262
Pages: 1873 - 1912
Type of Material: Journal Article
Journal/Proceeding Title: Econometrica
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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