An axiomatic foundation of conditional logit

This paper considers a decision maker choosing from a set of options when options have multiple real-valued attributes. Assuming DM chooses all options with positive probability, four invariance assumptions are necessary and sufficient for choice probabilities to take McFadden’s conditional logit fo...

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Bibliographic Details
Published inEconomic theory Vol. 72; no. 1; pp. 245 - 261
Main Author Breitmoser, Yves
Format Journal Article
LanguageEnglish
Published Berlin, Heidelberg Springer 01.07.2021
Springer Berlin Heidelberg
Springer Nature B.V
Subjects
Assumptions
Axiomatic foundation
Conditional logit
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Expected utility
Game Theory
Microeconomics
Public Finance
Research Article
Social and Behav. Sciences
Translation
Utility functions
Germany
Conditional logit
Axiomatic foundation
D01
C13
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Summary:This paper considers a decision maker choosing from a set of options when options have multiple real-valued attributes. Assuming DM chooses all options with positive probability, four invariance assumptions are necessary and sufficient for choice probabilities to take McFadden’s conditional logit form: independence of irrelevant alternatives, translation invariance, presentation independence and context independence. Variations on these assumptions yield generalized logit and contextual logit models. This shows that even specific logit models have behavioral foundations in simple invariance assumptions involving observables only, which therefore are directly testable.
ISSN:1432-0479
0938-2259
1432-0479
DOI:10.1007/s00199-020-01281-1