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Economic Theory

, Volume 68, Issue 4, pp 811–826 | Cite as

General Luce model

  • Federico Echenique
  • Kota SaitoEmail author
Research Article

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 

JEL Classification

D01 D03 

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.California Institute of TechnologyPasadenaUSA

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