Large deviations and multinomial probit choice

Emin Dokumaci and William Sandholm

Journal of Economic Theory, 2011, vol. 146, issue 5, 2151-2158

Abstract: We consider a discrete choice model in which the payoffs to each of an agentʼs n actions are subjected to the average of m i.i.d. shocks, and use tools from large deviations theory to characterize the rate of decay of the probability of choosing a given suboptimal action as m approaches infinity. Our model includes the multinomial probit model of Myatt and Wallace (2003) [5] as a special case. We show that their formula describing the rates of decay of choice probabilities is incorrect, provide the correct formula, and use our large deviations analysis to provide intuition for the difference between the two.

Keywords: Discrete choice theory; Large deviations theory; Multinomial probit model; Stochastic evolutionary game theory; Stochastic stability (search for similar items in EconPapers)
JEL-codes: C25 C73 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:146:y:2011:i:5:p:2151-2158

DOI: 10.1016/j.jet.2011.06.013

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