A Noisy Model of Individual Behaviour
AbstractThis paper develops a model of individual adjustment subject to mistakes. In this case when mistakes are assumed i.i.d., this process produces a probability distribution of agents decision whose evolution is determined by Fokker-Planck equation. This distribution converges to the unique, globally stable stationary distribution. In the case when choice space is one dimensional this distribution satisfies Independence of Irrelevant Alternatives (IIA) property. In multidimensional case for IIA to hold strong additional conditions on payoff function or error structure should be satisfied. The paper also considers generalization of model for autocorrelated errors in one-dimensional case.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 791.
Length: 31 pages
Date of creation: 2001
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WAGES ; DISTRIBUTION ; BEHAVIOUR;
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