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Random quasi-linear utility

Author

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  • Yang, Erya
  • Kopylov, Igor

Abstract

We propose a random quasi-linear utility model (RQUM) where quasi-linear utility functions are drawn randomly via some probability distribution π, and utility ties are broken by a convenient lexicographic rule. We characterize RQUM and identify π uniquely in terms of stochastic choice data. McFadden's (1973) additive random utility model is obtained as a special case where utility ties have a zero probability in all menus. Another distinct case of RQUM captures finite populations and derives π with a finite support. Our main axioms are testable. They prohibit context and reference dependence, and also modify the non-negativity of Block-Marschack polynomials for monetary cost variations. We also characterize RQUM through a stronger version of McFadden and Richter's (1990) axiom of revealed stochastic preferences (ARSP). This approach extends to incomplete datasets.

Suggested Citation

  • Yang, Erya & Kopylov, Igor, 2023. "Random quasi-linear utility," Journal of Economic Theory, Elsevier, vol. 209(C).
    • Handle: RePEc:eee:jetheo:v:209:y:2023:i:c:s0022053123000467
    DOI: 10.1016/j.jet.2023.105650
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    References listed on IDEAS

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    Cited by:

    1. Paul H. Y. Cheung & Yusufcan Masatlioglu, 2025. "Frame-dependent Random Utility," Papers 2502.00209, arXiv.org.
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    3. Cheng, Haotian & Ng'ombe, John N. & Choi, Yejun & Kalinda, Thomson H. & Zheng, Shi, 2025. "Understanding the drivers of smallholder dairy cooperative participation in developing countries: Evidence from rural Zambia," Agricultural Systems, Elsevier, vol. 224(C).
    4. Valkanova, Kremena, 2024. "Revealed preference domains from random choice," Games and Economic Behavior, Elsevier, vol. 147(C), pages 288-304.
    5. Wilfried Youmbi, 2024. "Nonparametric Analysis of Random Utility Models Robust to Nontransitive Preferences," Papers 2406.13969, arXiv.org.

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    Keywords

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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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