Dual random utility maximisation

Paola Manzini, Marco Mariotti*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    6 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
    Early online date5 Jun 2018
    DOIs
    Publication statusPublished - Sept 2018

    Keywords

    • Attraction effect
    • Similarity effect
    • Stochastic choice

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