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An axiomatic foundation of conditional logit

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  • Yves Breitmoser

    (Bielefeld University)

Abstract

This paper considers a decision maker choosing from a set of options when options have multiple real-valued attributes. Assuming DM chooses all options with positive probability, four invariance assumptions are necessary and sufficient for choice probabilities to take McFadden’s conditional logit form: independence of irrelevant alternatives, translation invariance, presentation independence and context independence. Variations on these assumptions yield generalized logit and contextual logit models. This shows that even specific logit models have behavioral foundations in simple invariance assumptions involving observables only, which therefore are directly testable.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:joecth:v:72:y:2021:i:1:d:10.1007_s00199-020-01281-1
    DOI: 10.1007/s00199-020-01281-1
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    Cited by:

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    2. Kory Kroft & René Leal-Vizcaíno & Matthew J. Notowidigdo & Ting Wang, 2022. "Parallel inverse aggregate demand curves in discrete choice models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(3), pages 923-946, October.

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    More about this item

    Keywords

    Conditional logit; Axiomatic foundation;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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