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Dual random utility maximisation

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posted on 2023-06-09, 08:41 authored by Paola Manzini, Marco Mariotti
Many prominent regularities of stochastic choice, such as the attraction, similarity and compromise effects, are incompatible with Random Utility Maximisation (RUM) as they violate Monotonicity. We argue that these regularities can be conveniently represented by a variation of RUM in which utility depends on only two states and state probabilities are allowed to depend on the menu. We call this model Dual Ran- dom Utility Maximisation (dRUM). dRUM is a parsimonious model that admits vio- lations of Monotonicity. We characterise dRUM in terms of three transparent expan- sion/contraction conditions. We also characterise the important special case in which state probabilities are constant across menus.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Journal of Economic Theory

ISSN

0022-0531

Publisher

Elsevier

Volume

177

Page range

162-182

Series

School of Economics and Finance Discussion Paper

Department affiliated with

  • Economics Publications

Institution

University of St Andrews

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2018-05-31

First Open Access (FOA) Date

2019-12-05

First Compliant Deposit (FCD) Date

2018-05-30

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