Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185748
Authors: 
Breitmoser, Yves
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper No. 78
Abstract: 
Multinomial logit is the canonical model of discrete choice but widely criticized for requiring functional form assumptions as foundation. The present paper shows that logit is behaviorally founded without such assumptions. Logit\'s functional form obtains if relative choice probabilities are independent of irrelevant alternatives and invariant to utility translation, to relabeling options (presentation independence), and to changing utilities of third options (context independence). Reviewing behavioral evidence, presentation and context independence seem to be violated in typical experiments, though not IIA and translation invariance. Relaxing context independence yields contextual logit (Wilcox, 2011), relaxing presentation independence allows to capture \"focality\" of options.
Subjects: 
stochastic choice
logit
axiomatic foundation
behavioral evidence
utility estimation
JEL: 
D03
C13
Document Type: 
Working Paper

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