Random Utility with Unobservable Alternatives
Fuente:
arXiv
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Preprint |
| Published: |
2023
|
| Subjects: | |
| Online Access: | |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866911191262035968 |
|---|---|
| author | Kono, Haruki Saito, Kota Sandroni, Alec |
| author_facet | Kono, Haruki Saito, Kota Sandroni, Alec |
| contents | The random utility model, a cornerstone in economics, is axiomatized by Falmagne (1978) and McFadden and Richter (1990) with the assumption that if a menu is observable, the choice frequencies of all alternatives are also observable. However, in practice, it is common for choice frequencies of some alternatives to remain unobserved. To address this discrepancy, we obtain the testable implications of the random utility model when the choice frequencies of some alternatives are unobservable, which consist of nonredundant inequality constraints on observed choice frequencies. Our findings indicate that the widespread empirical practice of aggregating unobserved alternatives into a single "outside option" fails to capture significant implications of random utility models. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2302_03913 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | Random Utility with Unobservable Alternatives Kono, Haruki Saito, Kota Sandroni, Alec Theoretical Economics The random utility model, a cornerstone in economics, is axiomatized by Falmagne (1978) and McFadden and Richter (1990) with the assumption that if a menu is observable, the choice frequencies of all alternatives are also observable. However, in practice, it is common for choice frequencies of some alternatives to remain unobserved. To address this discrepancy, we obtain the testable implications of the random utility model when the choice frequencies of some alternatives are unobservable, which consist of nonredundant inequality constraints on observed choice frequencies. Our findings indicate that the widespread empirical practice of aggregating unobserved alternatives into a single "outside option" fails to capture significant implications of random utility models. |
| title | Random Utility with Unobservable Alternatives |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2302.03913 |