IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v30y1984i1p110-122.html
   My bibliography  Save this article

Thresholds and Transitivity in Stochastic Consumer Choice: A Multinomial Logit Analysis

Author

Listed:
  • S. K. Lioukas

    (Public Power Corporation, Athens, Greece)

Abstract

In previous work, thresholds have been introduced to describe situations where the consumer is indifferent between any two alternatives. Krishnan (Krishnan, K. S. 1977. Incorporating thresholds of indifference in probabilistic choice models. Management Sci. 23 (July) 1224--1233.) formalised thresholds as minimum perceivable differences between the utilities of the alternatives compared and incorporated such thresholds into the binary logit model. The present paper provides an extension and application of the theory to situations where the decision maker is confronted with more than two alternatives. In such situations thresholds can lead to systematic and predictable intransitivity of indifference, violating a basic postulate of utility theory. Explicit probabilities of transitive and intransitive choices are derived within the framework of the multinomial logit model and the stochastic consumer theory associated with this model. The empirical applicability and managerial usefulness of the proposed theory is illustrated using a transportation example with three alternatives. The data employed reflect actual travellers' use of interurban transport modes in Greece. Parameters are estimated by a maximum-likelihood technique, based on a gradient search method. The results support the existence of thresholds. The application has important policy implications.

Suggested Citation

  • S. K. Lioukas, 1984. "Thresholds and Transitivity in Stochastic Consumer Choice: A Multinomial Logit Analysis," Management Science, INFORMS, vol. 30(1), pages 110-122, January.
  • Handle: RePEc:inm:ormnsc:v:30:y:1984:i:1:p:110-122
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.30.1.110
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Obermeyer, Andy & Treiber, Martin & Evangelinos, Christos, 2015. "On the identification of thresholds in travel choice modelling," Journal of choice modelling, Elsevier, vol. 17(C), pages 1-9.
    2. Wayne DeSarbo & Kamel Jedidi & Joel Steckel, 1991. "A stochastic multidimensional scaling procedure for the empirical determination of convex indifference curves for preference/choice analysis," Psychometrika, Springer;The Psychometric Society, vol. 56(2), pages 279-307, June.
    3. Cantillo, Víctor & Amaya, Johanna & Ortúzar, J. de D., 2010. "Thresholds and indifference in stated choice surveys," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 753-763, July.
    4. Obermeyer Andy & Wieland Bernhard & Evangelinos Christos, 2014. "Die ökonomische Bewertung kleiner Reisezeiteinsparungen / The Economic Valuation of Small Travel Time Savings," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(1), pages 44-69, February.
    5. Di, Xuan & Liu, Henry X., 2016. "Boundedly rational route choice behavior: A review of models and methodologies," Transportation Research Part B: Methodological, Elsevier, vol. 85(C), pages 142-179.
    6. repec:kap:transp:v:44:y:2017:i:5:d:10.1007_s11116-016-9699-1 is not listed on IDEAS
    7. repec:spr:annopr:v:257:y:2017:i:1:d:10.1007_s10479-015-1817-5 is not listed on IDEAS

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:30:y:1984:i:1:p:110-122. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: http://edirc.repec.org/data/inforea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.