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General Luce model

Author

Listed:
  • Federico Echenique

    (California Institute of Technology)

  • Kota Saito

    (California Institute of Technology)

Abstract

We extend the Luce model of discrete choice theory to satisfactorily handle zero-probability choices. The Luce mode struggles to explain choices that are not made. The model requires that if an alternative y is never chosen when x is available, then there is no set of alternatives from which y is chosen with positive probability. In our model, if an alternative y is never chosen when x is available, then we infer that y is dominated by x. While dominated by x, y may still be chosen with positive probability, when grouped with a comparable set of alternatives.

Suggested Citation

  • Federico Echenique & Kota Saito, 2019. "General Luce model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(4), pages 811-826, November.
    • Handle: RePEc:spr:joecth:v:68:y:2019:i:4:d:10.1007_s00199-018-1145-5
    DOI: 10.1007/s00199-018-1145-5
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    References listed on IDEAS

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    12. Echenique, Federico & Saito, Kota & Tserenjigmid, Gerelt, 2018. "The perception-adjusted Luce model," Mathematical Social Sciences, Elsevier, vol. 93(C), pages 67-76.
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    Cited by:

    1. Bechler, Georg & Steinhardt, Claudius & Mackert, Jochen & Klein, Robert, 2021. "Product line optimization in the presence of preferences for compromise alternatives," European Journal of Operational Research, Elsevier, vol. 288(3), pages 902-917.
    2. Sanjay Dominik Jena & Andrea Lodi & Claudio Sole, 2021. "On the estimation of discrete choice models to capture irrational customer behaviors," Papers 2109.03882, arXiv.org.
    3. Yves Breitmoser, 2021. "An axiomatic foundation of conditional logit," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(1), pages 245-261, July.
    4. Steverson, Kai & Brandenburger, Adam & Glimcher, Paul, 2019. "Choice-theoretic foundations of the divisive normalization model," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 148-165.
    5. Lin, Yunhui & Wang, Yuan & Lee, Loo Hay & Chew, Ek Peng, 2022. "Profit-maximizing parcel locker location problem under threshold Luce model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    6. Kovach, Matthew & Suleymanov, Elchin, 2023. "Reference dependence and random attention," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 421-441.
    7. Cerreia-Vioglio, Simone & Lindberg, Per Olov & Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2021. "A canon of probabilistic rationality," Journal of Economic Theory, Elsevier, vol. 196(C).
    8. Pennesi, Daniele, 2021. "Intertemporal discrete choice," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 690-706.
    9. Doğan, Serhat & Yıldız, Kemal, 2021. "Odds supermodularity and the Luce rule," Games and Economic Behavior, Elsevier, vol. 126(C), pages 443-452.

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    More about this item

    Keywords

    The Luce model; Logit model; Independence of irrelevant alternatives axiom;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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