Mogens Fosgerau, Emerson Melo, Andre de Palma, Matthew Shum
arXiv 26 Sep 2017 · Econometrics · publishedInternational Economic Review (2020) · 74 citations (OpenAlex)
arXiv:1709.09117 · PDF · DOI · OpenAlex · Extracted main text
This paper establishes a general equivalence between discrete choice and rational inattention models. Matejka and McKay (2015, AER) showed that when information costs are modelled using the Shannon entropy function, the resulting choice probabilities in the rational inattention model take the multinomial logit form. By exploiting convex-analytic properties of the discrete choice model, we show that when information costs are modelled using a class of generalized entropy functions, the choice probabilities in any rational inattention model are observationally equivalent to some additive random utility discrete choice model and vice versa. Thus any additive random utility model can be given an interpretation in terms of boundedly rational behavior. This includes empirically relevant specifications such as the probit and nested logit models.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | B. Hé bert and M. Woodford (2016) Rational Inattention with Sequential Information Sampling | 0.644 | 2 | 2 | 100% |
| 2 | D. McFadden (1978) Modelling the choice of residential location | 0.585 | 3 | 1 | 100% |
| 3 | T. Rockafellar (1970) Convex Analysis | 0.511 | 4 | 2 | 25% |
| 4 | D. McFadden (1981) Econometric Models of Probabilistic Choice | 0.511 | 2 | 1 | 100% |
| 5 | S. Anderson, A. de Palma, and J. Thisse (1992) Discrete Choice Theory of Product Differentiation self | 0.405 | 1 | 1 | 100% |
| 6 | S. Berry, J. Levinsohn, and A. Pakes (1995) Automobile Prices in Market Equilibrium | 0.405 | 1 | 1 | 100% |
| 7 | A. Caplin, M. Dean, and J. Leahy (2016) Rational Inattention, Optimal consideration sets and stochastic choice | 0.405 | 1 | 1 | 100% |
| 8 | K. Chiong, A. Galichon, and M. Shum (2016) Duality in Dynamic Discrete Choice Models self | 0.405 | 1 | 1 | 100% |
| 9 | J. Fox, K. Kim, S. Ryan, and P. Bajari (2012) The random coefficients logit model is identified | 0.405 | 1 | 1 | 100% |
| 10 | D. Fudenberg, R. Iijima, and T. Strzalecki (2015) Stochastic Choice and Revealed Perturbed Utility | 0.405 | 1 | 1 | 100% |
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