Revisiting consistency with random utility maximisation: theory and implications for practical work
Stephane Hess (),
Andrew Daly and
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Stephane Hess: University of Leeds
Andrew Daly: University of Leeds
Richard Batley: University of Leeds
Theory and Decision, 2018, vol. 84, issue 2, 181-204
Abstract While the paradigm of utility maximisation has formed the basis of the majority of applications in discrete choice modelling for over 40 years, its core assumptions have been questioned by work in both behavioural economics and mathematical psychology as well as more recently by developments in the RUM-oriented choice modelling community. This paper reviews the basic properties with a view to explaining the historical pre-eminence of utility maximisation and addresses the question of what departures from the paradigm may be necessary or wise in order to accommodate richer behavioural patterns. We find that many, though not all, of the behavioural traits discussed in the literature can be approximated sufficiently closely by a random utility framework, allowing analysts to retain the many advantages that such an approach possesses.
Keywords: Random utility maximisation; RUM properties; Behavioural patterns; Discrete choice (search for similar items in EconPapers)
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