nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2018‒03‒26
two papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Probabilizing the consumer: Georgescu-Roegen, Marschak and Quandt on the Modeling of the Consumer in the 1950s By Jean-Sébastien Lenfant
  2. The Axiomatic Foundation of Logit By Breitmoser, Yves

  1. By: Jean-Sébastien Lenfant (CLERSE - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille, Sciences et Technologies - ULCO - Université du Littoral Côte d'Opale - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Probabilistic models of choice (between sure prospects) have become a standard modeling practice since the 1980s, notably through the widespread use of the Logit Multinomial Model pioneered by McFadden (1974). However, the idea to model consumer’s behavior as a probabilistic behavior, hence accounting for some kind of behavioral instability in the pure theory of rational choice, dates back to the 1930s and led to significant investigations in the 1950s. It is the purpose of this article to confront three attempts by economists at developing models of individual choice that go beyond standard ordinalist utility theory through introducing principles of probabilistic behavior. We discuss first Georgescu-Roegen’s neglected contributions to this subject, though he pioneered the definition of probabilistic preference in 1936 and came back on the subject intensively in the 1950s. We then present Marschak’s (and his co-authors) attempts at axiomatizing a probabilistic model of choice in the same period. The third contribution studied is that of Quandt, who provides a more operational style of modeling. This set of contributions is discussed against a general background of transformations of the theory of rational behavior and of the methods proper to it.
    Keywords: consumer theory, indifference. , threshold in choice, intransitivity,probabilistic choice theory, Georgescu-Roegen, Marschak, Quandt, measurement of utility, experimental psychology
    Date: 2018
  2. By: Breitmoser, Yves (HU Berlin)
    Abstract: Multinomial logit is the canonical model of discrete choice but widely criticized for requiring functional form assumptions as foundation. The present paper shows that logit is behaviorally founded without such assumptions. Logit\'s functional form obtains if relative choice probabilities are independent of irrelevant alternatives and invariant to utility translation, to relabeling options (presentation independence), and to changing utilities of third options (context independence). Reviewing behavioral evidence, presentation and context independence seem to be violated in typical experiments, though not IIA and translation invariance. Relaxing context independence yields contextual logit (Wilcox, 2011), relaxing presentation independence allows to capture \"focality\" of options.
    Keywords: stochastic choice, logit, axiomatic foundation; behavioral evidence; utility estimation;
    JEL: D03 C13
    Date: 2018–03–07

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