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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. Mogens Fosgerau & Daniel L. McFadden & Michel Bierlaire, 2012. "Choice Probability Generating Functions," NBER Working Papers 17970, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. Andrew Chesher & Adam Rosen & Konrad Smolinski, 2011. "An instrumental variable model of multiple discrete choice," CeMMAP working papers CWP39/11, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  5. Melo, Emerson, 2012. "A representative consumer theorem for discrete choice models in networked markets," Economics Letters, Elsevier, vol. 117(3), pages 862-865.
  6. Mogens Fosgerau, 2004. "Investigating the distribution of the value of travel time savings," Urban/Regional 0410005, EconWPA, revised 25 Nov 2004.
  7. Simone Bertoli & Jesus Fernandez-Huertas Moraga & Francesc Ortega, 2010. "Crossing the Border: Self-selection, Earnings and Individual Migration Decisions," CReAM Discussion Paper Series 1011, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  8. Mehdi Farsi, 2008. "Risk-Aversion and Willingness to Pay for Energy Efficient Systems in Rental Apartments," CEPE Working paper series 08-55, CEPE Center for Energy Policy and Economics, ETH Zurich.
  9. Marc Henry & Ismael Mourifie, 2011. "Euclidean Revealed Preferences: Testing the Spatial Voting Model," CIRJE F-Series CIRJE-F-822, CIRJE, Faculty of Economics, University of Tokyo.
  10. 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.
  11. 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.

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