Dual random utility maximisation

Manzini, Paola and Mariotti, Marco (2018) Dual random utility maximisation. Journal of Economic Theory, 177. pp. 162-182. ISSN 0022-0531

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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.

Item Type: Article
Keywords: Stochastic choice, Attraction effect, Similarity effect
Schools and Departments: University of Sussex Business School > Economics
Subjects: H Social Sciences > HB Economic theory. Demography > HB0131 Methodology > HB0135 Mathematical economics. Quantitative methods Including econometrics, input-output analysis, game theory
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Depositing User: Paola Manzini
Date Deposited: 31 May 2018 09:13
Last Modified: 05 Dec 2019 02:00
URI: http://sro.sussex.ac.uk/id/eprint/70985

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