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Discrete choice and stochastic utility maximization

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  • Ruud H. Koning
  • Geert Ridder

Abstract

Discrete choice models are usually derived from the assumption of random utility maximization. We consider the reverse problem, whether choice probabilities are consistent with maximization of random utilities. This leads to tests that consider the variation of these choice probabilities with the average utilities of the alternatives. By restricting the range of the average utilities we obtain a sequence of tests with fewer maintained assumptions. In an empirical application, even the test with the fewest maintained assumptions rejects the hypothesis of random utility maximization. Copyright Royal Economic Society, 2003

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Econometrics Journal.

Volume (Year): 6 (2003)
Issue (Month): 1 (06)
Pages: 1-27

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Handle: RePEc:ect:emjrnl:v:6:y:2003:i:1:p:1-27

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Cited by:
  1. Bertoli, S. & Fernández-Huertas Moraga, J. & Ortega, F., 2013. "Crossing the border: Self-selection, earnings and individual migration decisions," Journal of Development Economics, Elsevier, vol. 101(C), pages 75-91.
  2. Delle Site, Paolo & Salucci, Marco Valerio, 2013. "Transition choice probabilities and welfare analysis in random utility models with imperfect before–after correlation," Transportation Research Part B: Methodological, Elsevier, vol. 58(C), pages 215-242.
  3. Andrew Chesher & Adam Rosen & Konrad Smolinski, 2011. "An instrumental variable model of multiple discrete choice," CeMMAP working papers CWP06/11, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Antonini, Gianluca & Bierlaire, Michel & Weber, Mats, 2006. "Discrete choice models of pedestrian walking behavior," Transportation Research Part B: Methodological, Elsevier, vol. 40(8), pages 667-687, September.
  5. Farsi, Mehdi, 2010. "Risk aversion and willingness to pay for energy efficient systems in rental apartments," Energy Policy, Elsevier, vol. 38(6), pages 3078-3088, June.
  6. Marc Henry & Ismael Mourifié, 2013. "Euclidean Revealed Preferences: Testing The Spatial Voting Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 650-666, 06.
  7. Jens Leth Hougaard & Tue Tjur & Lars Peter Østerdal, 2006. "Testing Preference Axioms in Discrete Choice experiments: A Reappraisal," Discussion Papers 06-11, University of Copenhagen. Department of Economics.
  8. Mogens Fosgerau, 2004. "Investigating the distribution of the value of travel time savings," Urban/Regional 0411006, EconWPA.
  9. Fosgerau, Mogens & McFadden, Daniel & Bierlaire, Michel, 2010. "Choice probability generating functions," MPRA Paper 24214, University Library of Munich, Germany.
  10. Jens Hougaard & Tue Tjur & Lars Østerdal, 2012. "On the meaningfulness of testing preference axioms in stated preference discrete choice experiments," The European Journal of Health Economics, Springer, vol. 13(4), pages 409-417, August.
  11. Melo, Emerson, 2012. "A representative consumer theorem for discrete choice models in networked markets," Economics Letters, Elsevier, vol. 117(3), pages 862-865.

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