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Large deviations and multinomial probit choice

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  • Dokumacı, Emin
  • Sandholm, William H.

Abstract

We 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) [5] 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 Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 146 (2011)
Issue (Month): 5 ()
Pages: 2151-2158

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Handle: RePEc:eee:jetheo:v:146:y:2011:i:5:p:2151-2158

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Discrete choice theory; Large deviations theory; Multinomial probit model; Stochastic evolutionary game theory; Stochastic stability;

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  1. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
  2. Myatt, David P. & Wallace, Chris, 2003. "A multinomial probit model of stochastic evolution," Journal of Economic Theory, Elsevier, vol. 113(2), pages 286-301, December.
  3. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  4. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
  5. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
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