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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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    Cited by:

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    3. Igor Kopylov, 2022. "Minimal rationalizations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(4), pages 859-879, June.
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    6. Narayanaswamy Balakrishnan & Efe A. Ok & Pietro Ortoleva, 2021. "Inferential Choice Theory," Working Papers 2021-60, Princeton University. Economics Department..
    7. Efe A. Ok & Gerelt Tserenjigmid, 2023. "Measuring Stochastic Rationality," Papers 2303.08202, arXiv.org, revised Dec 2023.
    8. Petri, Henrik, 2023. "Binary single-crossing random utility models," Games and Economic Behavior, Elsevier, vol. 138(C), pages 311-320.
    9. Li, Boyao, 2023. "Random utility models with status quo bias," Journal of Mathematical Economics, Elsevier, vol. 105(C).
    10. Bhattacharya, Mihir & Mukherjee, Saptarshi & Sonal, Ruhi, 2021. "Frame-based stochastic choice rule," Journal of Mathematical Economics, Elsevier, vol. 97(C).
    11. Daniele Caliari & Henrik Petri, 2024. "Irrational Random Utility Models," Papers 2403.10208, arXiv.org.
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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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