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A repeated-choice foundation for stochastic choice

Author

Listed:
  • Lu, Jay

    (Department of Economics, University of California, Los Angeles)

  • Saito, Kota

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

Abstract

We characterize when an agent’s observed stochastic choice can be represented as a limit frequency of optimal choices over time. In our model, an agent repeatedly chooses among risky prospects aware that future preferences will evolve according to a subjective ergodic utility process. We show that the parameters of the model can be uniquely identified and provide a complete characterization. As part of our axiomatization, we extend the representation theorems of Gul and Pesendorfer (2006) and Dekel et al. (2001, 2007) to an infinite-dimensional space with countably-additive probability measures. This is accomplished through a unified methodology based on Lipschitz continuous utilities.

Suggested Citation

  • Lu, Jay & Saito, Kota, 0. "A repeated-choice foundation for stochastic choice," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:6597
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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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