Fosgerau, Mogens and Lindberg, Per Olov and Mattsson, Lars-Göran and Weibull, Jörgen (2015): Invariance of the distribution of the maximum.
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Abstract
Many models in economics involve probabilistic choices where each decision-maker selects the best alternative from a finite set. Viewing the value of each alternative as a random variable, the analyst is then interested in the choice probabilities, that is, the probability for an alternative to give the maximum value. Much analytical power can be gained, both for positive and normative analysis, if the maximum value is statistically independent of which alternative obtains the highest value. This note synthesizes and generalizes previous results on this invariance property. We provide characterizations of the property within a wide class of distributions that comprises the McFadden GEV class, show implications in several directions, and establish connections with copulas. We illustrate the usefulness of the invariance property by way of a few examples.
Item Type: | MPRA Paper |
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Original Title: | Invariance of the distribution of the maximum |
Language: | English |
Keywords: | Choice; random utility; extreme value; leader-maximum; invariance; independence |
Subjects: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C25 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions ; Probabilities D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles |
Item ID: | 63529 |
Depositing User: | Prof. Mogens Fosgerau |
Date Deposited: | 10 Apr 2015 20:45 |
Last Modified: | 14 Oct 2019 15:22 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/63529 |
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