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General Luce Model

Echenique, Federico and Saito, Kota (2015) General Luce Model. Social Science Working Paper, 1407. California Institute of Technology , Pasadena, California. https://resolver.caltech.edu/CaltechAUTHORS:20160323-155625592

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Abstract

We extend the Luce model of discrete choice theory to satisfactorily handle zero-probability choices. The Luce model (or the Logit model) is the most widely applied and used model in stochastic choice, but it struggles to explain choices that are never made. The Luce 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: y cannot be chose, if from sets of alternatives that exclude x. We relax this assumption. 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 - even with high probability - when grouped with a comparable set of alternatives.


Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription
https://resolver.caltech.edu/CaltechAUTHORS:20191114-143959789Related ItemJournal Article
ORCID:
AuthorORCID
Echenique, Federico0000-0002-1567-6770
Additional Information:November 2015.
Group:Social Science Working Papers
Subject Keywords:Stochastic Choice, Logit Model, Luce Model, Independence of Irrelevant Alternatives, Dominance
Series Name:Social Science Working Paper
Issue or Number:1407
Classification Code:JEL D01,D10
Record Number:CaltechAUTHORS:20160323-155625592
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20160323-155625592
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65636
Collection:CaltechAUTHORS
Deposited By: Katherine Johnson
Deposited On:23 Mar 2016 22:57
Last Modified:26 Nov 2019 11:15

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