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On the multinomial logit model

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  • Marsili, Matteo

Abstract

We show that the Multinomial Logit model of bounded rational choice can be derived in the same way as the Gibbs–Boltzmann distribution in statistical physics. In particular, this model describes the behavior of a thermodynamic agent (which is an agent whose utility function depends on a very large number of variables) with respect to a small subset of variables “weakly interacting” with the others. We also show that the same model is obtained if entropic control costs or information costs are introduced, in which case the temperature like parameter can be considered as the price of (negative) entropy.

Suggested Citation

  • Marsili, Matteo, 1999. "On the multinomial logit model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 269(1), pages 9-15.
    • Handle: RePEc:eee:phsmap:v:269:y:1999:i:1:p:9-15
    DOI: 10.1016/S0378-4371(99)00074-6
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    References listed on IDEAS

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    1. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    2. Daniel L. McFadden, 1976. "Quantal Choice Analysis: A Survey," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 363-390, National Bureau of Economic Research, Inc.
    3. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, April.
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    Cited by:

    1. Tamotsu Onozaki, 2018. "Nonlinearity, Bounded Rationality, and Heterogeneity," Springer Books, Springer, number 978-4-431-54971-0, December.
    2. James Costain & Anton Nakov, 2019. "Logit Price Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(1), pages 43-78, February.
    3. Costain, James & Nakov, Anton, 2015. "Precautionary price stickiness," Journal of Economic Dynamics and Control, Elsevier, vol. 58(C), pages 218-234.
    4. Yanagita, Tatsuo & Onozaki, Tamotsu, 2010. "Dynamics of market structure driven by the degree of consumer’s rationality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(5), pages 1041-1054.
    5. Jean-Philippe Bouchaud, 2012. "Crises and collective socio-economic phenomena: simple models and challenges," Papers 1209.0453, arXiv.org, revised Dec 2012.
    6. Christoph J. Borner & Ingo Hoffmann & John H. Stiebel, 2023. "On the Connection between Temperature and Volatility in Ideal Agent Systems," Papers 2303.15164, arXiv.org.
    7. James Costain, 2017. "Costly decisions and sequential bargaining," Working Papers 1729, Banco de España.

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