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On path independent stochastic choice

Author

Listed:
  • Ahn, David S.

    () (Department of Economics, University of California, Berkeley)

  • Echenique, Federico

    () (Division of the Humanities and Social Sciences, California Institute of Technology)

  • Saito, Kota

    () (Division of the Humanities and Social Sciences, California Institute of Technology)

Abstract

We investigate stochastic choice when only the average and not the entire distribution of choices is observable, focusing attention on the popular Luce model. Choice is path independent if it is recursive, in the sense that choosing from a menu can be broken up into choosing from smaller submenus. While an important property, path independence is known to be incompatible with continuous choice. The main result of our paper is that a natural modification of path independence, that we call partial path independence, is not only compatible with continuity but ends up characterizing the ubiquitous Luce (or Logit) rule.

Suggested Citation

  • Ahn, David S. & Echenique, Federico & Saito, Kota, 2018. "On path independent stochastic choice," Theoretical Economics, Econometric Society, vol. 13(1), January.
  • Handle: RePEc:the:publsh:2653
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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20180061/19833/594
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    References listed on IDEAS

    as
    1. Antoine Billot & Itzhak Gilboa & Dov Samet & David Schmeidler, 2005. "Probabilities as Similarity-Weighted Frequencies," Econometrica, Econometric Society, vol. 73(4), pages 1125-1136, July.
    2. Chambers, Christopher P. & Hayashi, Takashi, 2010. "Bayesian consistent belief selection," Journal of Economic Theory, Elsevier, vol. 145(1), pages 432-439, January.
    3. Kalai, Ehud & Megiddo, Nimrod, 1980. "Path Independent Choices," Econometrica, Econometric Society, vol. 48(3), pages 781-784, April.
    4. Machina, Mark J & Parks, Robert P, 1981. "On Path Independent Randomized Choice: Comment," Econometrica, Econometric Society, vol. 49(5), pages 1345-1347, September.
    5. Chambers, Christopher P., 2008. "Consistent representative democracy," Games and Economic Behavior, Elsevier, vol. 62(2), pages 348-363, March.
    6. Faruk Gul & Paulo Natenzon & Wolfgang Pesendorfer, 2014. "Random Choice as Behavioral Optimization," Econometrica, Econometric Society, vol. 82, pages 1873-1912, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Luce model; stochastic choice; logit model; path independence;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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