Dogit model and rational inattention

Karim Nchare

Economics Letters, 2021, vol. 205, issue C

Abstract: This paper establishes an equivalence result between the Dogit model and the rational inattention model. The Dogit choice model introduced by Gaudry and Dagenais (1979) is an extension of the multinomial logit model which can potentially violate the independence of irrelevant alternatives axiom and allow for captive or inattentive behaviors. McFadden (1981) argues that a drawback of the Dogit model is its inconsistency with the standard random utility framework. We show that when the information cost is modeled using a generalized Shannon entropy function, the Dogit model is observationally equivalent to a rational inattention model.

Keywords: Discrete choice; Dogit model; Multinomial logit; Rational inattention (search for similar items in EconPapers)
JEL-codes: D1 D10 D8 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521002317

DOI: 10.1016/j.econlet.2021.109954

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