Theoretical Economics
Journal of the Econometric Society
Edited by: Federico Echenique • ISSN (e): 1555-7561 • ISSN (print): 1933-6837
Edited by: Federico Echenique • ISSN (e): 1555-7561 • ISSN (print): 1933-6837
Theoretical Economics: Jan, 2018, Volume 13, Issue 1
https://doi.org/10.3982/TE2653
p. 61-86
David S. Ahn, Federico Echenique, Kota Saito
We investigate stochastic choice when only the average and not the entire distribution of choices is observable, focusing attention on the popular Luce model. Choice is path independent if it is recursive, in the sense that choosing from a menu can be broken up into choosing from smaller submenus. While an important property, path independence is known to be incompatible with continuous choice. The main result of our paper is that a natural modification of path independence, that we call partial path independence, is not only compatible with continuity but ends up characterizing the ubiquitous Luce (or
Logit) rule.