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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

Suggested Citation

  • Ruud H. Koning & Geert Ridder, 2003. "Discrete choice and stochastic utility maximization," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 1-27, June.
  • Handle: RePEc:ect:emjrnl:v:6:y:2003:i:1:p:1-27
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    Cited by:

    1. 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.
    2. Marc Henry & Ismael Mourifié, 2013. "Euclidean Revealed Preferences: Testing The Spatial Voting Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 650-666, June.
    3. Farsi, Mehdi, 2010. "Risk aversion and willingness to pay for energy efficient systems in rental apartments," Energy Policy, Elsevier, vol. 38(6), pages 3078-3088, June.
    4. Fosgerau, Mogens, 2006. "Investigating the distribution of the value of travel time savings," Transportation Research Part B: Methodological, Elsevier, vol. 40(8), pages 688-707, September.
    5. Bertoli, S. & Fernández-Huertas Moraga, J. & Ortega, F., 2013. "Crossing the border: Self-selection, earnings and individual migration decisions," Journal of Development Economics, Elsevier, vol. 101(C), pages 75-91.
    6. Andrew Chesher & Adam M. Rosen & Konrad Smolinski, 2013. "An instrumental variable model of multiple discrete choice," Quantitative Economics, Econometric Society, vol. 4(2), pages 157-196, July.
    7. 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;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(4), pages 409-417, August.
    8. Fosgerau, Mogens & McFadden, Daniel & Bierlaire, Michel, 2010. "Choice probability generating functions," MPRA Paper 24214, University Library of Munich, Germany.
    9. 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.
    10. Melo, Emerson, 2012. "A representative consumer theorem for discrete choice models in networked markets," Economics Letters, Elsevier, vol. 117(3), pages 862-865.
    11. Eymann, Angelika & Ronning, Gerd, 1992. "Microeconometric models of tourists' destination choice," Discussion Papers, Series II 171, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    12. 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.

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