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Law of demand and stochastic choice

Author

Listed:
  • S. Cerreia-Vioglio

    (Università Bocconi and IGIER)

  • F. Maccheroni

    (Università Bocconi and IGIER)

  • M. Marinacci

    (Università Bocconi and IGIER)

  • A. Rustichini

    (University of Minnesota)

Abstract

We consider random choice rules that, by satisfying a weak form of Luce’s choice axiom, embody a form probabilistic rationality. We show that for this important class of stochastic choices, the law of demand for normal goods—arguably the main result of traditional consumer theory—continues to hold on average when strictly dominated alternatives are dismissed.

Suggested Citation

  • S. Cerreia-Vioglio & F. Maccheroni & M. Marinacci & A. Rustichini, 2022. "Law of demand and stochastic choice," Theory and Decision, Springer, vol. 92(3), pages 513-529, April.
    • Handle: RePEc:kap:theord:v:92:y:2022:i:3:d:10.1007_s11238-021-09844-x
    DOI: 10.1007/s11238-021-09844-x
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    Keywords

    Law of demand; Luce choice axiom;

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