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Dual random utility maximisation

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  • Manzini, Paola
  • Mariotti, Marco

Abstract

Many prominent regularities of stochastic choice, such as the attraction, similarity and compromise effects, are incompatible with Random Utility Maximisation (RUM) as they violate Monotonicity. We argue that these regularities can be conveniently represented by a variation of RUM in which utility depends on only two states and state probabilities are allowed to depend on the menu. We call this model Dual Random Utility Maximisation (dRUM). dRUM is a parsimonious model that admits violations of Monotonicity. We characterise dRUM in terms of three transparent expansion/contraction conditions. We also characterise the important special case in which state probabilities are constant across menus.

Suggested Citation

  • Manzini, Paola & Mariotti, Marco, 2018. "Dual random utility maximisation," Journal of Economic Theory, Elsevier, vol. 177(C), pages 162-182.
    • Handle: RePEc:eee:jetheo:v:177:y:2018:i:c:p:162-182
    DOI: 10.1016/j.jet.2018.05.015
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    5. Narayanaswamy Balakrishnan & Efe A. Ok & Pietro Ortoleva, 2021. "Inferential Choice Theory," Working Papers 2021-60, Princeton University. Economics Department..
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    8. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    9. Efe A. Ok & Gerelt Tserenjigmid, 2023. "Measuring Stochastic Rationality," Papers 2303.08202, arXiv.org, revised Dec 2023.
    10. Petri, Henrik, 2023. "Binary single-crossing random utility models," Games and Economic Behavior, Elsevier, vol. 138(C), pages 311-320.
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    More about this item

    Keywords

    Stochastic choice; Attraction effect; Similarity effect;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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