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Consumer Preference Axioms: Behavioral Postulates for Describing and Predicting Stochastic Choice

  • John R. Hauser

    (Northwestern University)

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    This paper draws on econometrics, von Neumann-Morgenstern utility theory, stochastic choice theory, and consumer behavior to develop five basic axioms or postulates of stochastic choice behavior. These axioms imply the existence and uniqueness of a preference function which identifies how consumers evaluate products in terms of product attributes. The preference function produces a scalar goodness measure for each product in a consumer's choice set. These goodness measures then predict choice probabilities for each product in a consumer's choice set. The advantage of these axioms is that they extend the strengths of von Neumann-Morgenstern theory to stochastic choice and make possible the determination of consistent choice probabilities.

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    File URL: http://dx.doi.org/10.1287/mnsc.24.13.1331
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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 24 (1978)
    Issue (Month): 13 (September)
    Pages: 1331-1341

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    Handle: RePEc:inm:ormnsc:v:24:y:1978:i:13:p:1331-1341
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