Dual random utility maximisation

Abstract

Dual Random Utility Maximisation (dRUM) is Random Utility Maximisation when utility depends on only two states. dRUM has many relevant behavioural interpretations and practical applications. We show that it is (generically) the only stochastic choice rule that satisfies Regularity and two new simple properties: Constant Expansion (if the choice probability of an alternative is the same across two menus, then it is the same in the combined menu), and Negative Expansion (if the choice probability of an alternative is less than one and differs across two menus, then it vanishes in the combined menu). By extending the theory to menu-dependent state probabilities we are able to accommodate prominent violations of Regularity such as the attraction, similarity and compromise effects. J.E.L. codes: D03, D01

Rational Inattention, Optimal Consideration Sets, and Stochastic Choice

“…As with Manzini and Mariotti [2014], our work provides a link between the study of consideration sets and the recent literature aimed at understanding stochastic choice data (e.g. Agranov and Ortoleva [2015], Manzini and Mariotti [2016], Apesteguia and Ballester [2016]). An earlier literature in marketing discussed models of endogenous consideration set formation (e.g.…”

Dynamic Random Utility

“…64 Lu (forthcoming) studied an analogous model with state-dependent utilities in an objective state-space setting. 65 Other recent contributions by Apesteguia, Ballester, and Lu (2017) and Manzini and Mariotti (2018) respectively studied random utility models with linearly ordered choice options and binary support. 66 On more limited domains, Gul, Natenzon, and Pesendorfer (2014) studied an agent who receives an outcome only once at the end of a decision tree and characterized a generalization of the Luce model.…”

“… Other recent contributions by Apesteguia, Ballester, and Lu () and Manzini and Mariotti () respectively studied random utility models with linearly ordered choice options and binary support. …”

Corrigendum to “Dual random utility maximisation” [J. Econ. Theory 177 (2018) 162–182]

“…For the claim to hold an additional axiom is required. We correct the mistake in the proof in Manzini and Mariotti [3].…”

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Lemma 2 (and hence the statement of Theorem 1) in Manzini and Mariotti [3] is incorrect as stated. For the claim to hold an additional axiom is required.

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