Dual random utility maximisation

Paola Manzini, Marco Mariotti*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

5 Citations (Scopus)

Abstract

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 Random Utility Maximisation (dRUM). dRUM is a parsimonious model that admits violations of Monotonicity. We characterise dRUM in terms of three transparent expansion/contraction conditions. We also characterise the important special case in which state probabilities are constant across menus.

Original languageEnglish
Pages (from-to)162-182
Number of pages21
JournalJournal of Economic Theory
Volume177
DOIs
Publication statusPublished - Sep 2018

Bibliographical note

Publisher Copyright:
© 2018 Elsevier Inc.

Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.

Keywords

  • Attraction effect
  • Similarity effect
  • Stochastic choice

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