General Luce model

Federico Echenique and Kota Saito ()
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Kota Saito: California Institute of Technology

Economic Theory, 2019, vol. 68, issue 4, No 2, 826 pages

Abstract: Abstract We extend the Luce model of discrete choice theory to satisfactorily handle zero-probability choices. The Luce mode struggles to explain choices that are not made. The model requires that if an alternative y is never chosen when x is available, then there is no set of alternatives from which y is chosen with positive probability. In our model, if an alternative y is never chosen when x is available, then we infer that y is dominated by x. While dominated by x, y may still be chosen with positive probability, when grouped with a comparable set of alternatives.

Keywords: The Luce model; Logit model; Independence of irrelevant alternatives axiom (search for similar items in EconPapers)
JEL-codes: D01 D03 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s00199-018-1145-5

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