Random quasi-linear utility

Erya Yang and Igor Kopylov

Journal of Economic Theory, 2023, vol. 209, issue C

Abstract: We propose a random quasi-linear utility model (RQUM) where quasi-linear utility functions are drawn randomly via some probability distribution π, and utility ties are broken by a convenient lexicographic rule. We characterize RQUM and identify π uniquely in terms of stochastic choice data. McFadden's (1973) additive random utility model is obtained as a special case where utility ties have a zero probability in all menus. Another distinct case of RQUM captures finite populations and derives π with a finite support. Our main axioms are testable. They prohibit context and reference dependence, and also modify the non-negativity of Block-Marschack polynomials for monetary cost variations. We also characterize RQUM through a stronger version of McFadden and Richter's (1990) axiom of revealed stochastic preferences (ARSP). This approach extends to incomplete datasets.

Keywords: Random utility; Quasi-linear utility; Tie-breaking; Finite datasets; ARSP; Block-Marschak polynomials (search for similar items in EconPapers)
JEL-codes: D01 D90 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:209:y:2023:i:c:s0022053123000467

DOI: 10.1016/j.jet.2023.105650

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