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Debreu’s choice model

Author

Listed:
  • Pavlo R. Blavatskyy

    (Montpellier Business School)

Abstract

Debreu (American Economic Review 50:186–188, 1960) famously criticized Luce (Individual choice behavior, Wiley, New York, 1959) choice model with what became known as the red-bus blue-bus example: if a choice set contains two distinct alternatives C (car) and B (blue bus) then adding a third alternative A (red bus) that is essentially identical to B does not affect the choice probability of C but reduces the choice probability of B by half. Debreu’s critique highlights the existence of substitution effects violating the principle of independence from irrelevant alternatives—the cornerstone of Luce (Individual choice behavior, Wiley, New York, 1959) choice model. This paper weakens this principle to construct a model of probabilistic choice satisfying Debreu’s critique.

Suggested Citation

  • Pavlo R. Blavatskyy, 2024. "Debreu’s choice model," Theory and Decision, Springer, vol. 96(2), pages 297-310, March.
    • Handle: RePEc:kap:theord:v:96:y:2024:i:2:d:10.1007_s11238-023-09947-7
    DOI: 10.1007/s11238-023-09947-7
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    References listed on IDEAS

    as
    1. Matthew Kovach & Gerelt Tserenjigmid, 2022. "Behavioral Foundations of Nested Stochastic Choice and Nested Logit," Journal of Political Economy, University of Chicago Press, vol. 130(9), pages 2411-2461.
    2. Faruk Gul & Paulo Natenzon & Wolfgang Pesendorfer, 2014. "Random Choice as Behavioral Optimization," Econometrica, Econometric Society, vol. 82, pages 1873-1912, September.
    3. Matthew Kovach & Gerelt Tserenjigmid, 2022. "The Focal Luce Model," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 378-413, August.
    4. Faro, José Heleno, 2023. "The Luce model with replicas," Journal of Economic Theory, Elsevier, vol. 208(C).
    Full references (including those not matched with items on IDEAS)

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