Choice among lotteries when preferences are stochastic
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Date
1998Metadata
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- Discussion Papers [1003]
Abstract
Abstract:
This paper discusses the problem of specifying probabilistic models for choices (strategies) with
uncertain outcomes. The point of departure is an extension of the axiom system of the von
Neumann-Morgenstern Expected utility theory to the case when the preferences are stochastic. This
extended axiom system is combined with Luce Choice Axiom; "Independence from Irrelevant
Alternatives", and imply a particular choice model that contains the Luce model as a special case. An
additional invariance assumption is subsequently proposed that yields a complete characterization of
the mathematical structure of the model.
Keywords: Random tastes, choice among lotteries, random utility models, bounded rationality,
probabilistic choice models, independence from irrelevant alternatives.