Breitmoser, Yves (2016): The axiomatic foundation of logit.
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Abstract
Multinomial logit is the canonical model of discrete choice but widely criticized for requiring specific functional 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 (narrow bracketing), to relabeling options (presentation independence), and to changing utilities of third options (context independence). Least squares differs from logit only by making the additional assumption that utility is perceived to be quadratic around the utility maximizer, showing that logit is the more general model and least squares actually requires specific functional assumptions. Reviewing behavioral evidence, presentation and context independence seem to be violated in typical experiments, not IIA. Relaxing context independence yields contextual logit (Wilcox, 2011), relaxing presentation independence allows to capture "focality" of options.
Item Type:  MPRA Paper 

Original Title:  The axiomatic foundation of logit 
Language:  English 
Keywords:  stochastic choice, logit, axiomatic foundation, behavioral evidence, utility estimation, least squares 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C13  Estimation: General D  Microeconomics > D0  General > D03  Behavioral Microeconomics: Underlying Principles 
Item ID:  74334 
Depositing User:  Yves Breitmoser 
Date Deposited:  08 Oct 2016 14:09 
Last Modified:  26 Sep 2019 21:31 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/74334 
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The axiomatic foundation of logit and its relation to behavioral welfare. (deposited 28 May 2016 13:28)
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