American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Deliberately Stochastic
American Economic Review
vol. 109,
no. 7, July 2019
(pp. 2425–45)
Abstract
We study stochastic choice as the outcome of deliberate randomization. We derive a general representation of a stochastic choice function where stochasticity allows the agent to achieve from any set the maximal element according to her underlying preferences over lotteries. We show that in this model stochasticity in choice captures complementarity between elements in the set, and thus necessarily implies violations of Regularity/Monotonicity, one of the most common properties of stochastic choice. This feature separates our approach from other models, e.g., Random Utility.Citation
Cerreia-Vioglio, Simone, David Dillenberger, Pietro Ortoleva, and Gil Riella. 2019. "Deliberately Stochastic." American Economic Review, 109 (7): 2425–45. DOI: 10.1257/aer.20180688Additional Materials
JEL Classification
- D80 Information, Knowledge, and Uncertainty: General
- D81 Criteria for Decision-Making under Risk and Uncertainty