Large deviations and multinomial probit choice
AbstractWe consider a discrete choice model in which the payoffs to each of an agentʼs n actions are subjected to the average of m i.i.d. shocks, and use tools from large deviations theory to characterize the rate of decay of the probability of choosing a given suboptimal action as m approaches infinity. Our model includes the multinomial probit model of Myatt and Wallace (2003)  as a special case. We show that their formula describing the rates of decay of choice probabilities is incorrect, provide the correct formula, and use our large deviations analysis to provide intuition for the difference between the two.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 146 (2011)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/inca/622869
Discrete choice theory; Large deviations theory; Multinomial probit model; Stochastic evolutionary game theory; Stochastic stability;
Find related papers by JEL classification:
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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